CGRF SandBox January 2024

CGRF SandBox January 2024 1

CGRF SandBox January 2024 2 S.No INDEX Pg.No 1 From the Editor’s Desk 3 2 Bankers’ Column a) RBI on Fair Lending Practices – Levying of Penal charges on Loan accounts 4 b) Increasing popularity of the Indian e-retail industry 5 3 Corporate Column a) ESOP– (Employees Stock Ownership Plan) 6 b) Compulsory dematerialisation of Securities of Private Limited Companies 8 4 Insolvency & Bankruptcy Code Authorised Representatives & Representatives under IBC 10 5 Court Orders 15 6 IP’s Corner Common mistakes by IPs during conduct of CIRP 24 7 General Think Again – Book Review 27 8 Guess the answers 31 CONTENTS Board of Directors S. Rajendran N. Nageswaran COPYRIGHT: All rights reserved. No part of this newsletter may be reproduced or transmitted in any form or by any means, including electronic, mechanical, photocopying, recording or otherwise without the express consent of the copyright to Create & Grow Research Foundation. திருக்குறள் 461 : அழிவதூஉம் ஆவதூஉம் ஆகி வழிபயக்கும் ஊதியமும் சூழ்ந்து செயல். தமிழ்உரை: எந்தமாதிரியான தீங்கு வரும், எந்தமாதிரியான நன்மம வரும், இதனால் கிமைக்கும் ஊதியம் என்ன என்பமத முற்றிலும் ஆராய்ந்து செயல்பை வவண்டும். Explanation: Let a man reflect on what will be lost, what will be acquired and (from these) what will be his ultimate gain, and (then, let him) act. Honorary Editors S. Rajendran N. Nageswaran S. Venkataraman CGRF Team B. Mekala K. Murugasamy K. Priya J. Rajeswari Sub Editors K. Raghu M. S. Elamathi R. Anusha DISCLAIMER: The opinions and views contained in this publication are not necessarily those of the publishers. Readers are advised to seek specialized advice before acting on information contained in this publication, which is provided for general use and may not be appropriate for the reader’s particular circumstances. CIN: U73200TN2019NPL132843 (A section 8 Company registered under Companies Act, 2013)

CGRF SandBox January 2024 3 From the desk of the Editor It gives us immense pleasure to reach the First Issue of SandBox for 2024 to the hands of our esteemed readers. Infra push for a vibrant economy As we celebrate India’s 75th Republic Day, it is really good to see that the country is marching forward to set new records, surpassing several milestones. The steps taken to revamp the infrastructure across the country are playing a key role in all round economic growth. It is noteworthy that in January 2024, India overtook Hong Kong in global equity market rankings by market capitalization to become the 4th largest market (the combined value of shares listed on Indian stock exchanges reach USD 4.33 Trillions - Bloomberg). In the aftermath of the Covid-19 pandemic, several countries have ramped up their presence in India including setting up their manufacturing base and therefore the foreign direct investments have seen significant growth. Huge leap of faith All this augurs well for the country to have a wonderful launchpad to uplift the quality of life of its huge population. The challenges of being the largest democratic nation apart, the rise of the country to be amongst the Top-5 economies of the world is a matter of pride for every Indian. It is hoped that this remarkable run will power the nation to improve literacy, to offer gainful employment and to revamp the health care system so as to elevate the quality of living of its masses. ‘Ease of Doing Business’ and ‘East of getting Justice’ In spite of making strong strides on ease of doing business, one must admit that areas of concern still remain. The labour law reforms are to be accelerated if the economic growth is to be sustained. Ease of doing business and ease of compliances are way better now but still lagging behind even many smaller countries. While the government has taken several steps to remove archaic laws, a lot more has to be done on this front to encourage young entrepreneurs to set up their business ventures, without being overly worried about compliance issues. It is hoped that the government machinery will continuously strive to improve on these metrics. Revamping the provisions of IBC Several far-reaching steps have been initiated to address the issues highlighted by the banks and financial institutions to cut down the delays. It is learnt that Finance Ministry as well as RBI are seized of the matter and it is hoped that the IBC ecosystem may get sharper and faster, sooner. Secured Lenders’ predicament while approving resolution plans under IBC There are cases where a secured creditor who is having a superior security interest but in the resolution plan he gets a raw deal and therefore he dissents to the resolution plan. In this kind of a situation, the Code says that the dissenting creditor is entitled to receive at least the liquidation value payable to him as per Section 53 in proportion to his voting share in the event of liquidation of the corporate debtor. In a recent case of Ruchi Soya Industries Limited, one of the secured financial creditors, DBS Bank-Singapore dissented to the resolution plan given by Patanjali Ayurved Ltd. as they felt that their security interest had a far better value and the distribution under the plan provided much lesser amount to them. The resolution plan was approved by the remaining creditors in the CoC on the premise that a dissenting financial creditor needs to be paid at least the liquidation value he is likely to get in the event of liquidation, which was provided in the plan. The Supreme Court in its order dated 3rd January 2024 examined this critical aspect in depth and opined that when a dissenting creditor has a better security interest which he could realize in the event of liquidation and therefore he should be considered a minimum payment in the resolution plan in line with the security interest value but finally suggested to refer the matter to a larger bench to examine this issue and give their decision. We are glad to carry an analysis of this judgment in this issue of SandBox. A few more articles of relevance, recent case laws update, Students’ Corner and a few snippets find their place in this Issue for an interesting reading. Of course, do take some time to laugh and relax after seeing the “Humour” column. We earnestly request feedback from our readers to continuously improve the quality of SandBox. Yours truly S. Rajendran

CGRF SandBox January 2024 4 RBI on Fair Lending Practices - Levying of Penal charges on Loan accounts CGRF Bureau RBI vide its circular dated 18th August 2023 had issued certain guidelines on application of penal charges on loan accounts and the instructions were to be effective from 1st January 2024. Now, vide its circular dated 29.12.2023, the effective date has been pushed to 1st April 2024 considering that certain clarifications and additional time has been sought by some regulated entities (REs) to reconfigure their internal systems and operationalize the circular dated 18th Aug 2023. RBI has also issued a set of FAQs on the subject based on queries raised by some of the REs (Banks, NBFCs and other financing institutions) for the benefit of all as well as to the borrowers. They have also clarified that REs shall ensure that the instructions are implemented in respect of all the fresh loans availed from April 1, 2024 onwards. In the case of existing loans, the switchover to new penal charges regime shall be ensured on the next review/ renewal date falling on or after April 1, 2024, but not later than June 30, 2024. The genesis for the circular dated 18th August 2023 was supervisory reviews on the divergent practices amongst the REs with regard to levy of penal interest/charges leading to customer grievances and disputes. RBI also noted that many REs use penal rates of interest, over and above the applicable interest rates, in case of defaults / non-compliance by the borrower with the terms on which credit facilities were sanctioned. RBI pointed out that the intent of levying penal interest/charges is essentially to inculcate a sense of credit discipline and such charges are not meant to be used as a revenue enhancement tool over and above the contracted rate of interest. After the review the following guidelines were issued for strict compliance: 1. The penalty shall be treated as “penal charges” and not “penal interest” and not added to the rate of interest charged on the advances. 2. The penal charges should not be capitalised, that is, no further interest computed on such charges. 3. The REs shall not introduce any additional component to the rate of interest and ensure compliance to these guidelines in both letter and spirit. 4. The REs shall formulate a Board approved policy on penal charges or similar charges on loans. 5. The quantum of penal charges should be reasonable and commensurate with the actual non-compliance and should not be discriminatory based on loan/product category. 6. The penal charges levied on individual borrowers should be on par with what is applied on “nonindividual borrower” for a similar noncompliance. 7. The quantum and reason for penal charges shall be clearly disclosed by REs to the customers in the loan agreement and most important terms & conditions / Key Fact Statement (KFS) as applicable, in addition to being displayed on REs website under Interest rates and Service Charges. 8. Whenever reminders for non-compliance of material terms and conditions of loan are sent to borrowers, the applicable penal charges shall be communicated. Further, any instance of levy of penal charges and the reason therefor shall also be communicated. 9. The penal charges will not apply to Credit Cards, External Commercial Borrowings, Trade Credits and Structured Obligations which are covered under product specific directions. (Image source: website) Important additional points covered in the FAQs issued on 29th Dec 2023 on the same matter, besides some accounting and other clarifications given are: 10. Penal charges are not applicable in case of rupee/ foreign currency export credit and other foreign currency loans. 11. Additional penal charges cannot be levied on the earlier outstanding amount of penal charges. 12. Referring to point 5 above, the penal charges can be different within the same product category depending upon the amount of loan provided it is as per the policy formulated by the Board. 13. REs may charge interest on unpaid interest (including on unpaid EMI) at the contracted rate of interest till the date of remediation, and not at the penal rate of interest.

CGRF SandBox January 2024 5 Increasing Popularity of the Indian e-retail industry Mr.Hargovind Sachdev General Manager (Retd.) SBI “e-Retail: It’s not how much you spend; it's how much you save that matters.” The e-retail market (electronic retail) has recorded impressive growth of over $ 55 billion this year till November 2023. A report by Bain & Company in collaboration with Flipkart predicts that the top line is expected to touch $160 billion by 2028. So far, more than 50% of such sales have happened in cash with the local stores without any tax revenue to the government. There were no discounts for the buyers because of the absence of competition. With e-retail, both the buyer and the government benefit apart from the seller. The e-retail market is projected to grow with online spending of around 6%, whereas the same is 24% in the US and 35% in China, indicating space to grow. The availability of affordable data, efficient delivery logistics, EMI options on credit cards, fintech infrastructure, and robust digital consumer ecosystems suggest that India will replicate China. (Image source: website) The e-retail industry in the country is adopting new business models to captivate young Indians for sourcing their daily needs. The latest innovations in e-retail are Q-commerce platforms, hyper-value commerce, live commerce and fast fashion. All these endeavours provide seamless hyper-convenience and lightning-quick delivery of products, leading to user delight and satisfaction. The facilities are now percolating down to tier-2 and tier-3 cities after covering almost 50% of grocery delivery in metros. Even though over 90% of India’s purchases happen offline, the growing traffic congestion and parking problems divert people towards eretail in large numbers. Several factors contribute to the increasing popularity of eRetail in India: Digital Literacy: As digital literacy improves, more people feel comfortable navigating online platforms, comparing products, reading reviews, and making informed purchase decisions. Growing Internet Penetration: The widespread availability of affordable smartphones and increasing Internet penetration across urban and rural areas has enabled a larger population to access online shopping platforms. Digital Payment Adoption: The rise of digital payment systems and the push towards a cashless economy has made online transactions more convenient and secure, driving eRetail growth. Economic Growth: India's economic growth has led to an expansion of the middle class, resulting in increased disposable income. Consumers are more willing to spend online, driving eRetail. E-commerce Platforms: The presence of wellestablished e-commerce platforms like Flipkart, Amazon, and others has played a significant role in popularising online shopping. These platforms offer various products, competitive prices, and attractive discounts. Convenience and Accessibility: Online shopping allows consumers to browse and purchase products from the comfort of their homes. The ability to shop 24/7 without the need to visit physical stores appeals to busy urban consumers. Wide Product Variety: E-commerce platforms provide many products unavailable in local stores. This broad variety appeals to diverse consumer preferences. Discounts and Deals: Online retailers frequently offer discounts, deals, and promotional offers, attracting priceconscious consumers. Special sales events like Diwali Sales, Year End Sale, Great Indian Festival, and others create a sense of urgency and excitement among shoppers. Improved Logistics and Delivery Services: The development of efficient logistics and delivery networks has significantly reduced delivery times, making online shopping more attractive to consumers who value quick and reliable deliveries. COVID-19 Pandemic: The COVID-19 pandemic accelerated the shift towards online shopping as people sought contactless ways to purchase goods. This trend persists as consumers prioritise safety. Customised Shopping Experience: E-commerce platforms leverage data analytics to understand consumer

CGRF SandBox January 2024 6 preferences and provide personalised recommendations, enhancing the overall shopping experience. Retail describesselling a product or service to a consumer for personal use. Retail transactions occur through different sales channels, such as online, in a brick-andmortar storefront, in direct sales, or via mail. The defining feature of a retail transaction is that the end user is the buyer. The E-Retail shall continue to grow as long as the seller takes care of the buyer's convenience. The combination of technological advancements, changing consumer behaviour, economic growth, and the efforts of e-commerce platforms have fueled retail's popularity in India. E-retail is expected to evolve further as technology advances and online shopping becomes integral to retail. Rightly said, “How your customers feel when they engage with you matters, but how you sell and deliver matters the most. Salessuccess comes after you stretch yourself beyond your limits daily.” ESOP - (Employees Stock Ownership Plan) N. Nageswaran, Insolvency Professional This is an article on ESOP (Employees Stock Ownership Plan) a model pursued in USA and not on ESOP (Employees Stock Option Plan) available in India. Except that both are models of incentivizing employees to contribute more to the organization there is no other similarity whatsoever between them. This article is brought out to understand an ESOP prevalent in USA and in use with some variation in many other countries. Beginning with a statistical snap shot on ESOPs as on 31st Dec 2023 in USA, 6,232 companies have an ESOP of which 5,758 are private and 474 are public companies. The number of employees covered are 19,34,870 in the former and 1,20,12,975 in the latter respectively. There are about 250 getting added every year. Considering that the number of business entities as at the end of 2022 (last data available) was nearly 8 million employing 140 million people, the entities with ESOP seemingly is quite insignificant. Still the model is worth studying since the success that the ESOP companies have registered and the benefits it delivered to the stake holders and to the community is found to be significant. What is an ESOP? An employee stock ownership plan (ESOP) is an employee benefit plan that gives workers ownership interest in the company in the form of shares of stock. The working of an ESOP In simple terms, the employer who wants to pass on the benefit to his employees will form a Trust and will entrust with the shares he would like to bestow to his employees. He can do it purely as a benefit in the form of incentives to the employees or make it as sale of shares at fair market value payable by the employees. The employer himself can fund the amount required to the employees or arrange for a loan from a bank and stand guarantee for the same. In both the cases, the amount will be repayable by the employees from out of their salary earnings. These shares will be held by the trust in the names of the employees in accordance with the plan document as created and registered by the employer which will also identify the pattern of allotment to individual employees Humour time Two people went for dinner and ordered two cokes. Then they produced sandwiches from their briefcases and started to eat. The owner became quite concerned and marched over and told them, “You can’t eat your own sandwiches in here!” The two looked at each other, shrugged their shoulders, and then exchanged sandwiches. Legal Maxims Cursus curiae est lex curiae It is a Latin maxim which means ‘the practice of the court is the law of the court’. The procedure followed in the court will be the law of the court in the absence of any other procedure or law.

CGRF SandBox January 2024 7 taking into account set parameters such as length of service, grades of salary etc. The employer may also contribute towards the repayment of the loan by adding incentives to the employees along with salaries which could be used by the employees besides adding a deduction from their salaries towards repayment of the loan. Once when the loan is fully paid, the employee will be declared as a full-fledged owner of the shares and the plan document also would cover how he can get it encashed through the trust in place. This is the simplest form of an ESOP and the following is a diagrammatic expression of this model. The function of the trust in an ESOP Though ESOPs were in action in unstructured ways, the amendments to US tax laws in 1974 followed by the tax reforms of 1986 ensured that ESOPs were executed through a properly formed trust with the related trust document in place. Forming the trust is a special activity since the transactions with the trust by employers, employees and the financing institutions qualify for quite a good amount of tax exemptions. In the accounting model of the trusts, it is proved that the repayment of the entire loan availed by the employees (trust members) through the trust for acquiring shares can happen from out of the tax incentives itself availed both by the trust and the employer who will turn over the savings to the trust. Hence clarity in the formation, terms and conditions and functioning of the trust is pivotal for the success of an ESOP. Purposes of operationalising ESOPs 1. To ensure that the incentives passed on to the employees are invested back in to the company and add further value and enable the same to become a good retirement benefit for the employees. 2. To realise the values of their investment by owners of the entity at their convenience without any adverse effect on operations of the company. 3. To arrange for transition of leadership of the company to the existing employees at premeditated pace. 4. To facilitate the owners of closely held companies defer and possibly avoid tax on the gains made when selling their shares. 5. To facilitate the companies to raise finance for a variety of efforts, including business expansion, at will and in a most economical way. 6. To enable the owners remain in the helms of affairs and put in their efforts to add value to the company which eventually will benefit all the parties involved viz., the owners, the employees, the creditors and all the stakeholders of the company. 7. To enable the company to retain its identity and avoid poaching of the employees by competitors. Drawbacks said to be inbuilt in ESOPs and the arguments against 1. Floating a trust and maintaining could be a costly affair – But considering the tax incentives including zero tax possibilities, the cost is eventually not a burden either for the employer or for the employees. 2. ESOPs are said to be complicated affairs and very difficult to be grasped, particularly by the employees. The complexity creeps in when it moves away from a pure vanilla form but such instances are far and few and in case of such troubles, the parties involved can always resort to get trained sufficiently in the process and pass through the difficulties. 3. Some legal constraints make the ESOP inflexible and the implementation becomes difficult. This problem can be addressed while drafting the trust deed for the plan and incorporating suitable provisions to manoeuvre the constraints with the help of experts in the field. 4. If the company is a privately held and the ESOP has been in operation for long, then it will have to fund for re-purchase of the shares when the employees retire or leave the organisation. But the quantum of such repurchases are mostly with sufficient advance information, the company and the trust will be able to arrange funds either through internal surplus or through external financing. Sizeable attractive tax incentives are in place for the company or the external funding agencies and the funding requirements can be comfortably met with. 5. It is generally stated that for the purposes of making the ESOPs more functional, the management will have to share too much of intricate internal financial details of the company to the employees. This notion has been proved

CGRF SandBox January 2024 8 wrong that though such details are made available to the employees, rarely it resulted in an adverse situation due to misuse of that data. On the other hand, such openness, according to the studies conducted, resulted in the participating employees springing up with most workable solutions, when found necessary. 6. ESOPs are too risky for employees as they might end up resulting in losing their hard-earned incentives if the company does not perform well. The answer to this is that the employees would immediately become aware of such a situation as they have access to such data and in fact they would initiate necessary corrective actions to keep the value of the company and in turn the stocks they own. But studies have proved that such an eventuality is a rare phenomenon in the history of ESOP companies. Actual reasons for ESOPs not becoming prevalent. 1. The cost of rolling out ESOP and maintaining the same is prohibitive for smaller outfits, say with less than 20 employees despite availability of tax incentives. Also, most of such outfits would already be a S Corporation, meaning a company already availing tax benefits and registered as such. 2. ESOPs can be floated only with entities which are earning decent profit levels on a continuous basis as they should be in a position to make contributions to the plan and save tax thereby. 3. If the company is a privately owned one, they should also be in a position to arrange for buy back of the shares or arrange necessary funding for such an event. 4. The seller of the shares meaning the owners might be tempted at times with a better price being offered by outside buyers. But such a transaction would be possible only if 100 percent of the stocks are offered and an ESOP company might not be preferred by such a buyer. 5. The company’s payroll should be large enough to accommodate a decent percentage of the payroll as otherwise it may be impractical for an ESOP to buy a substantial percentage of the shares of the company over a decent span of time. 6. The maze of rules governing the ESOP companies and their application for tax incentives is also a reason for the model not being embraced even by units which are otherwise eligible for becoming an ESOP company. Compulsory dematerialisation of Securities of Private Limited Companies CS E. Gunaseelan SR Srinivasan & Co. LLP, Company Secretaries Preamble Dematerialisation of securities (Shares / debentures, etc.) were made mandatory for the unlisted public companies w.e.f. 2nd October 2018 vide the Companies (Prospectus and Allotment of Securities) Third Amendment Rules, 2018. A new sub rule namely 9A was inserted in the Companies (Prospectus and Allotment of Securities) Rules, 2014. The main essence of the amendment was that no unlisted public company shall do any of the actions like issue of fresh securities, buy back of securities, rights offer, etc until the entire holding of the securities of the promoters of the Company is dematerialised. Further, securities of the unlisted public companies cannot be transferred in physical mode and they can be transferred only after dematerialisation of the securities. Accordingly, the outcome expected of the amendment is that the corporate actions pertaining to the securities of unlisted public company companies can be done only in demat mode and strictly not in physical mode. This rule shall be complied with immediate effect. Exemptions from the compulsory demat were provided to the following classes of unlisted public companies: a. Nidhi Companies b. Government Companies c. Wholly owned subsidiaries Compulsory dematerialisation of securities of Private Limited Companies The above-mentioned provisions which were applicable only to unlisted public companies were made mandatory to private limited companies also vide the Companies (Prospectus and Allotment of Securities) Second Amendment Rules, 2023 notified on 27th October 2023. Accordingly, a new sub rule namely 9B was inserted in the Companies (Prospectus and Allotment of Securities) Rules, 2014. The compliance with this rule becomes mandatory w.e.f. 1st October 2024 as 18 months period

CGRF SandBox January 2024 9 of time is provided w.e.f. 31st March 2023 for existing private limited companies to comply. From the above, we can infer that a time period of 18 months from the end of the financial year is provided for complying with this provision in case of: a. Small Companies which have become a private company during a financial year b. Private companies incorporated during a financial year c. Conversion of LLPs and other forms of companies into private limited companies during a financial year Important differentiation factor between applicability of Rule 9A & Rule 9B is that 18 months’ time period is provided for compliance with the provisions for the private limited companies whereas the compliance requirement is immediate for unlisted public companies. Exemptions from the above rules (Rule 9B) are provided to the following companies: 1. Small companies 2. Government companies Hence, from the above applicability and exemptions, we can infer that the following classes of private limited companies shall mandatorily dematerialise its securities: 1. Private Companies which are not small companies 2. Section 8 Companies with share capital which are incorporated as a private limited company The following points are noteworthy for the private limited companies in the process of dematerialisation of the securities: • Additional cost to be incurred on annual basis for the dematerialised securities. • The Securities may become freely transferrable once they are dematerialised even though as per the Articles of Association (AOA) of the private limited companies there will be restriction on transferability of the securities. Companies may have to take steps to ensure that securities are not transferred without the approval of the Board of Directors and as per the provisions of the AOA of the company. • Corporate Action forms to be submitted to Registrar to an Issue (RTA) for each and every action pertaining to the securities of the private limited companies which increases the compliance burden. • E- Form PAS-6 to be filed on a half yearly basis with Registrar of Companies. • Sub rules (4) to (10) of 9A of the Companies (Prospectus and Allotment of Securities) Rules, 2014 which are applicable to unlisted public companies shall, mutatis mutandis, apply to the private companies also. These sub rules briefly mandate that the payment to the RTA shall be made on timely manner and in case of default, corporate actions of the securities cannot be done by the company. Further, the difference if any between issued capital and the capital held in dematerialised form shall be brought to the notice of depositories immediately. Security holders can file their grievances if any, with the Investor Education and Protection Fund Authority and the said Authority can proceed to take action on the grievances received if the company fails to redress the grievances promptly. (Image source: website) Rule 9B of Companies (Prospectus and Allotment of Securities) Rules, 2014 is given below for ready reference: “9B. Issue of securities in dematerialised form by private companies: - 1) Every private company, other than a small company, shall within the period referred to in sub-rule (2) – a) issue the securities only in dematerialised form; and b) facilitate dematerialisation of all its securities, in accordance with provisions of the Depositories Act, 1996 (22 of 1996) and regulations made thereunder. 2) A private company, which as on last day of a financial year, ending on or after 31st March, 2023, is not a small company as per audited financial statements for such financial year, shall, within eighteen months of closure of such financial year, comply with the provisions of this rule. 3) Every private company referred to in sub-rule (2) making any offer for issue of any securities or buyback of securities or issue of bonus shares or rights offer, after the date when it is required to comply with this rule, shall ensure that before making such offer, entire holding of securities of its promoters, directors, key managerial

CGRF SandBox January 2024 10 personnel has been dematerialised in accordance with the provisions of the Depositories Act, 1996 (22 of 1996) and regulations made thereunder. 4) Every holder of securities of the private company referred to in sub-rule (2), - a) who intends to transfer such securities on or after the date when the company is required to comply with this rule, shall get such securities dematerialised before the transfer; or b) who subscribes to any securities of the concerned private company whether by way of private placement or bonus shares or rights offer on or after the date when the company is required to comply with this rule shall ensure that all his securities are held in dematerialised form before such subscription. 5) The provisions of sub-rules (4) to (10) of rule 9A shall, mutatis mutandis, apply to the dematerialisation of securities under this rule. 6) The provisions of this rule shall not apply in case of a Government company. Authorised Representatives & Representatives under IBC S. Rajendran Registered Insolvency Professional Introduction The Insolvency and Bankruptcy Code, 2016 (“IBC”) and the relevant Regulations contain provisions regarding situations where a creditor forming part of the Committee of Creditors (“CoC”) can appoint an authorised representative who can participate and vote in the meetings of CoC on their behalf. However, there is no specific definition for the terms “representative” and “authorised representative” either in the Code or in the Regulations. Generally, any financial creditor entitled to attend and vote in the meetings of CoC shall also be entitled to appoint a representative. However, it would be relevant to note the distinctive provisions contained in the Code regarding appointment of a “representative” and “authorised representative”. Before an amendment to the Code effective from 6th June 2018, Sec.24(5) of IBC stated that any creditor who is a member of the CoC may appoint an insolvency professional (IP) other than the IRP or RP to represent such creditor in a meeting of the CoC. The fees payable to such IP will be borne by the individual creditor. Till this point in time, the term “authorised representative” was not used in the Code. Though both the terms “representative” and “authorised representative” appear to convey the same meaning, one gets an impression that only those who are appointed under Sec.21(6) and Sec.21(6A) are referred to as “authorised representatives”. However, on a closer scrutiny, all representatives appointed by financial creditors can be termed as “authorised representatives”. Amendment to IBC wef 6th June 2018 – Homebuyers become financial creditors In this historic amendment, the definition of the term ‘financial debt’ was widened by way of inserting an Explanation to Sec.5(8)(f) of IBC. By this amendment, the amount raised from an allottee under a real estate project shall be deemed to be an amount having the commercial effect of a borrowing. In other words, allottees in a real estate project were also recognized as financial creditors. Simultaneously, Sec.21(6) was amended, Sec.21(6A), (6B) and Sec.25A were inserted with effect from the same We thank our esteemed readers who had subscribed for “SandBox” during 2023. Your gesture of subscription has helped us to partially defray the expenses associated with this noble work. For those readers who paid their annual subscription in January 2023, it’s time for renewal of subscription for 2024. CGRF SandBox Annual Subscription Single Copy Print Version Rs.2000/- Rs.200/- Digital Version Rs.1000/- Rs.100/- We request your continued patronage and support by way of Annual Subscription to SandBox which will go a long way to support the research efforts of CGRF. CGRF seeks your kind gesture for the Annual Subscription for a print version or a digital copy. The subscription may be remitted to the following Bank A/c of CGRF: Name Create & Grow Research Foundation Account no. 4397002100224897 Bank Punjab National Bank, Mahalingapuram Branch, Chennai IFSC code PUNB0439700 Subscription for CGRF SandBox

CGRF SandBox January 2024 11 date to introduce the concept of “authorised representatives” (“AR”) on behalf of a few financial creditors. A quick glance into the amended provisions of Sec.21, Sec.24 and Sec.25A would throw some light on who are the “authorised representatives”. Sec. Prior to amendment After Amendment Sec.21(3) Where the corporate debtor owes financial debts to two or more financial creditors as part of a consortium or agreement, each such financial creditor shall be part of the CoC and their voting share shall be determined on the basis of the financial debts owed to them. Subject to subsections (6) and (6A), where the corporate debtor owes financial debts to two or more financial creditors as part of a consortium or agreement, each such financial creditor shall be part of the CoC and their voting share shall be determined on the basis of the financial debts owed to them. Sec.24(3) The resolution professional shall give notice of each meeting of CoC toa) Members of CoC The resolution professional shall give notice of each meeting of CoC to- (a) Members of CoC, including the authorised representatives referred to in Sec.21(6), (6A) and Sec.24(5) Sec.24(5) Any creditor who is a member of the CoC may appoint an insolvency professional other than the resolution professional to represent such creditor in a meeting of the CoC. Subject to Sec.21(6),(6A) and (6B), Any creditor who is a member of the CoC may appoint an insolvency professional other than the resolution professional to represent such creditor in a meeting of the CoC. Sec.25A Newly inserted Section Rights and duties of authorised representative of financial creditors. (1)The authorised representative Sec. Prior to amendment After Amendment under Sec.21(6) or (6A) or Sec.24(5) shall have the right to participate and vote in meetings of CoC on behalf of the financial creditor he represents in accordance with the prior voting instructions of such creditors…. Well, the above amendments lead us to three provisions, viz., Sec.24(5), Sec.21(6) and Sec.21(6A) as they are the relevant sections under which an authorised representative can be appointed. Let us examine them one by one. Who can appoint ARs? 1) A financial creditor (secured or otherwise) who is forming part of the CoC can appoint an IP (other than the IRP / RP) as its representative to attend, participate and vote in the meetings of CoC on its behalf. [Sec.24(5)] 2) Each financial creditor being part of a consortium arrangement or syndicated facility which provides for a single trustee or agent to act for all financial creditors can authorise the trustee or agent to act on his behalf in the CoC meetings to the extent of his voting share. He can also represent himself in the CoC or he can appoint an IP at his own cost to represent himself in the CoC to the extent of his voting share. He can also exercise his voting right with one or more financial creditors jointly or severally. [Sec.21(6)] 3) i) Where the financial debt is in the form of securities or deposits and the terms of the financial debt provide for appointment of a trustee or agent to act as AR for all the financial creditors, such trustee or agent shall act on behalf of such financial creditors. [Sec.21(6A) (a)] ii) Where a financial debt is owed to a class of creditors, other than those in (2) above or 3(i) above, exceeding the specified number (which is 10 as of now), the IRP shall make an application to the AA to appoint an IP to act s their AR who shall be appointed by the AA prior to the first meeting of the CoC. [Sec.21(6A) (b)]. It may be noted that only in this case of “class of creditors”, Claim Form “CA” has to be submitted during the CIRP proceedings. By a joint reading of the above two clauses, it would emerge that individual

CGRF SandBox January 2024 12 homebuyers (allottees to a real estate project) and deposit-holders where there is no provision for appointment of a trustee or agent, would form part of this category who are likely to be larger in number and therefore, an IP has to represent them in the meetings of CoC to protect their interests. (A question arises as to who are the class of creditors, isn’t it? Well, the CIRP Regulations define this term which is explained later in this Article.) iii) Where a financial debt is represented by a guardian, executor or administrator, such person shall act as AR on behalf of such financial creditors. [Sec.21(6A) (c)] In a nutshell, these amendments were made to clearly specify the financial creditors who may appoint an AR, situations where ARs shall be appointed or shall act as such and the rights and duties of such ARs of financial creditors. A diagrammatic representation of these three situations where authorised representatives can be appointed by financial creditors is given below: Amendments to CIRP Regulations relating to Authorised Representatives Class of Creditors By an amendment to the CIRP Regulations with effect from 3rd July 2018, “class of creditors” was defined to mean a class with at least 10 financial creditors under Sec.21(6A) (b). The term “creditors in a class” shall also be construed to mean “class of creditors” which is essentially a subsect of financial creditors. IP to represent the class of creditors if their number exceeds 10 Regulation 4A states the procedure to be followed by the IRP in cases where he identifies that a class of creditors having at least 10 financial creditors are there as per Sec.21(6A) (b), to give option of three IPs to represent them and the public announcement calling for claims to include the details of the three IPs who are eligible and willing to act as AR. Reg.16A was inserted to lay down the procedure for selection of an IP to act as the AR of financial creditors in a class. This regulation further provides the manner in which the AR shall perform his role including voting in different situations. The AR of creditors in a class shall be entitled to receive fees for every meeting of the CoC attended by him as per the following table: Number of creditors in the class Fee per meeting of the committee (Rs.) Fee per meeting of the creditors (Rs.) 10-100 30,000 10,000 101-1000 40,000 12,000 More than 1000 50,000 15,000 Replacement of Authorised Representatives Pursuant to a subsequent amendment wef 18th Sept. 2023, the financial creditors in a class representing not less than 10% voting share may seek replacement of the AR with an IP of their choice by making a request to the IRP / RP who shall follow a procedure to select an IP out of three IPs (the existing AR, the IP proposed by a creditor and another IP, all meeting the eligibility criteria). The IRP/RP shall apply to the adjudicating authority for appointment of the authorised representative who receives highest voting share of the financial creditors in that class. Rights & Duties of AR The authorised representative shall have the right to participate and vote in meetings of the CoC on behalf of the financial creditors he represents. The authorised representative shall not act against the interest of the financial creditor he represents and shall always act in accordance with their prior instructions. In addition, Reg.16A(10) lists down the following responsibilities for the authorised representatives of a class of creditors like home-buyers (allottees to a real estate project) or fixed-deposit holders, as stated in Sec.21(6A)(b): The authorised representative shall: -

CGRF SandBox January 2024 13 a) assist the creditors in a class he represents in understanding the discussions and considerations of the committee meetings and facilitate informed decisionmaking; b) review the contents of minutes prepared by the resolution professional and provide his comments, if any, to the resolution professional; c) help the creditors in a class he represents during the consultations made by the resolution professional to prepare a strategy for marketing of the assets of the corporate debtor in terms of sub-regulation (1) of regulation 36C; d) work in collaboration with the creditors in a class he represents to enhance the marketability of the assets of the corporate debtor in terms of sub-regulation (3) of regulation 36C; e) assist the creditors in a class he represents in evaluating the resolution plans submitted by resolution applicants; f) ensure that the creditors in a class he represents have access to any information or documents required to form an opinion on issues discussed in the committee meetings; g) update regularly the creditors in a class he represents on the progress of the corporate insolvency resolution process; h) make suggestions for modifications of the resolution plan as may be required by the creditors in class he represents; i) record proceedings and prepare the minutes of the meeting with the creditors in a class he represents; and j) act as a representative for the creditors in a class he represents in representations before the Adjudicating Authority, National Company Law Appellate Tribunal, and other regulatory authorities. Further, the respective class of creditors may also propose additional responsibility upon the AR in relation to the representation of their interest in the Committee. It may be noted that the AR shall have no role in receipt or verification of claims of creditors of the class he represents. On the other hand, the IRP or the RP shall provide electronic means of communication between the AR and the creditors in the class. Voting by Authorised Representative – Sec.25A and Reg.25A The authorised representative shall vote in meetings of the CoC on behalf of the financial creditor he represents in accordance with the prior voting instructions of such creditors obtained through physical or electronic means. If the authorised representative represents several financial creditors, then he shall cast his vote in respect of each financial creditor in accordance with instructions received from each financial creditor to the extent of his voting share and, where any financial creditor(s) fails to provide any instruction, then the AR shall abstain from voting on behalf of such creditor. How an AR appointed under Sec.21(6A) shall cast his vote The authorised representative appointed under Sec.21(6A) shall cast his vote on behalf of all the financial creditors he represents in accordance with the decision taken by a vote of more than fifty per cent. of the voting share of the financial creditors he represents, who have cast their vote. However, when there is a voting to be cast in respect of an application under Sec.12A of IBC, the AR shall cast his vote in accordance with instructions received from each financial creditor to the extent of his voting share or abstain if no instruction has been received from a financial creditor to the extent of his voting share. Representative of Operational Creditors Distinctive of the above provisions of authorised representatives, there is a provision regarding representatives of operational creditors, who shall also be entitled to receive notice of the meetings of the CoC. Section 24(3)(c) of IBC provides that the resolution professional shall give notice of each meeting of the CoC to operational creditors or their “representatives” if the amount of their aggregate dues is not less than 10% of the debt. It is also provided in Sec.24(4) that “one representative” of the operational creditors may attend the meetings of CoC, but they shall not have any right to vote in such meetings. It may also be noted that the absence of any such representative of operational creditors shall not invalidate the proceedings of such meetings. One may notice the absence of the word “authorised” before the representative in the above provisions relating to operational creditors. During Liquidation Process - Representatives in the meetings of SCC It may be recollected that Regulation 31A of Liquidation Process Regulations, speak about stakeholders’ consultation committee (SCC), its role and powers to advise the liquidator on various matters relating to the liquidation process. Prior to the amendment with effect from 16 September 2022, there was a restriction in the number of creditors in each category like secured financial creators, unsecured financial creditors, workmen and employees, governments, operational creditors, shareholders, etc. Irrespective of the quantum of claims admitted, the number of representatives in each category was limited to one or two or four depending upon the proportion of the quantum of claims admitted to the liquidation value.

CGRF SandBox January 2024 14 However, subsequent to the amendment, the SCC shall be formed with all the creditors and the concept of limiting the number of representatives has been done away with. Further, it has been provided that the liquidator may facilitate the stakeholders of each class, namely, financial creditors in a class, workmen, employees, government departments, other operational creditors and shareholders to nominate their representative for participation in the consultation committee. It is also stated that if the stakeholders of any class fail to nominate their representatives, such representative shall be selected by a majority of voting share of the class present and voting. It is also provided that such representative shall vote in proportion to the reporting share of the stakeholders it represents. Should there be only one representative of financial creditors in an SCC if there is more than one of them in liquidation process? In a situation where the corporate debtor is under liquidation and the SCC has been constituted based on admitted claims, let us assume that there are a few banks as financial creditors, both secured and unsecured, a few homebuyers are there, a few deposit holders are there and workmen, employees and operational creators, government departments and shareholders are there. A question arises whether the banks as financial creditors are also to be represented through only one representative. The answer is “No”. The concept of representative comes into play only in the case of “financial creditors in a class”. Though this term is not defined in the Liquidation Process Regulations, the definition provided in CIRP Regulations can be applied. Therefore, banks which are financial creditors, but not forming part of a class of financial creditors may be represented in the SCC meetings in their individual capacity. However, the rest of the financial creditors in a class like home-buyers or deposit-holders or the cases provided under Sec.21(6A)(b) have to be represented by a representative in the meetings of SCC. Similarly other creditors like workmen, employees, government departments, operational creditors shareholder have to be represented by a representative for each of the class. Authorised Representative for the purpose of a scheme under Sec.230 of Companies Act during liquidation process It may be relevant to point out here that during liquidation process, where a scheme of compromise or arrangement under Sec.230 of Companies Act, 2013 is considered by the creditors for approval, the Adjudicating Authorities have mandated an IP to represent each class of the creditors as their AR in the voting process for approval of the scheme. The Order dated 16th April 2023 of Hon’ble NCLT, Chennai in the case of Ambika Sugars Limited is an example. (Image source: website) In order to give better clarity on a practical aspect, a few questions are answered here in relation to the applicability of the authorised representative concept during CIRP or Liquidation of a corporate debtor: FAQs 1) A PSU Bank is a secured financial creditor to a corporate debtor with a 25% voting share. There are two more banks in the CoC as secured financial creditors having individually voting share of 30% and 35% respectively. There is no consortium or syndication facility agreement to provide for a trustee or agent. Can the FC with 35% voting share say that he will represent the other two banks in the CoC? Answer: No. Each of the financial creditor shall be entitled to attend, participate in the meetings of CoC and vote to the extent of their voting share. 2) With the same voting share amongst the financial creditors but the corporate debtor is now in

CGRF SandBox January 2024 15 liquidation and SCC has been formed, can the FC with 35% voting share say that he will represent the other two banks in the SCC? Answer: No. So long as they do not form part of a “financial creditors in a class”, each of the financial creditors shall be entitled to attend, participate in the meetings of CoC and vote to the extent of their voting share. 3) With the same example, there are seven more unsecured financial creditors having total voting share of 10%. Can it be said that all the banks (3 of them) and the 7 unsecured financial creditors constitute a “class of creditors”? Answer: No. Reg.31A(3) clearly state that only financial creditors in a class and other classes of operational creditors like workmen, employees, government departments, suppliers, shareholders, etc. may nominate their representative for participation in the SCC. Conclusion Banks and Financial Institutions being corporate entities or bodies corporate, they may authorise someone from their own entity to represent on their behalf in the meetings of CoC of the corporate debtor and vote to the extent of their voting share. Alternatively, they may also appoint an IP to represent them in the meetings of the CoC and vote on their behalf. In a situation of consortium lending, even if the agreement provides for a single trustee or agent to represent all of them or syndicated facility, the individual lenders may represent themselves in the CoC meetings or appoint an IP to represent them. Naturally, it follows that when there is no provision in a consortium or agreement for appointment of an agent, each financial creditor shall be part of the CoC and entitled to exercise their voting. In the case of financial debt in the form of securities (like debentures) or deposits and the terms of debt provide for an agent or trustee to act as their authorised representative, he shall be the authorised representative on behalf of all such financial creditors. It may be noted here that the individual creditors cannot represent or exercise their voting in meetings of CoC. If financial debt is owed to a class of creditors not covered in the above situations and where their number is at least 10, an IP is required to be appointed as their authorised representative. Since the individual home-buyers and deposit-holders are most likely to be in this category of class of creditors, there are several provisions governing the role and duties of their authorised representative. Court Orders CGRF Legal Interns (Image source: website) DBS BANK LIMITED SINGAPORE V. RUCHI SOYA INDUSTRIES LIMITED AND ANOTHER SUPREME COURT OF INDIA|03.01.2024 “Whether a dissenting financial creditor is entitled to get the value of the security interest in the resolution plan? Question referred to a larger Bench.” Facts of the Case The Corporate Insolvency Resolution Process (‘CIRP') was initiated against Ruchi Soya Industries Limited (‘Corporate Debtor’, 'CD') on 15.12.2017 under Section 7 the Insolvency and Bankruptcy Code, 2016 (‘IBC, 2016’). DBS Bank Limited Singapore was one of the Financial Creditors (Appellant) of the CD. The appellant had a financial debt around Rs. 243,00,00,000/-. The appellant submitted a claim and it was admitted by the Resolution Professional at Rs. 242,96,00,000/-. The appellant had sole and exclusive nature of security by way of mortgage/hypothecation over immovable and fixed assets of the CD. The appellant had a greater value compared to collaterals held by other creditors and having exclusive first charge over the assets of the CD. Patanjali Ayurved Limited (‘Successful Resolution Applicant’) submitted a resolution Plan for Rs. 4134,00,00,000/- on 20.03.2019 against the aggregate claims of around Rs. 8398,00,00,000/-. The resolution plan value was approximately 49.22% of the total admitted claims of the financial creditors. The appellant voted against the resolution plan and became a Dissenting Financial Creditor. The Committee of Creditors (‘CoC’) approved the resolution plan given by the Patanjali Ayurved Limited with the majority voting of 96.95% on 30.04.2019 and it was approved by the Adjudicating Authority (‘AA’) vide order dated 24.07.2019. The appellant challenged the distribution mechanism of the resolution plan and filed an application before the AA. The AA dismissed the application in the same order dated 24.07.2019.

CGRF SandBox January 2024 16 Issue Whether Section 30(2)(b)(ii) of the Insolvency and Bankruptcy Code, 2016, as amended in 2019, entitles the dissenting financial creditor to be paid the minimum value of its security interest? The Hon’ble NCLAT Observation During pendency of the appeal, the Insolvency and Bankruptcy Code (Amendment) Act, 2019, was notified by way of a gazette notification dated 16.08.2019 and amended Section 30(2)(b) of the IBC, 2016. The amended Section 30(2)(b)(ii) of the IBC, 2016 provides that Operational Creditors and Dissenting Financial Creditors (DFC) shall not be paid an amount lesser than the amount to be paid to creditors in the event of liquidation of the Corporate Debtor under Section 53(1) of the IBC, 2016. The NCLAT on 18.11.2019 dismissed the appeal preferred by the DFC against the decision of NCLT Mumbai Bench vide order dated 24.07.2019. The NCLAT reasoned that the amendment of Section 30(2)(b) which is only applicable in the below circumstances: i. Where a resolution plan has not been approved or rejected by the Adjudicating Authority; or ii. Where an appeal has been preferred under section 61 or Section 62 or such an appeal is not time barred under any provision of law for time being in force against the approval or rejection of a resolution plan by the Adjudicating Authority; or iii. Where a legal proceeding has been initiated in any court against the decision of the Adjudicating Authority in respect of the ‘Resolution Plan’. Here, the DFC filed an appeal to challenge the distribution of resolution plan but not the resolution plan approval by the Adjudicating Authority. Hence, the question of applicability of amended Section 30(2) of the IBC, 2016 does not arise. The distribution cannot be made in violation of the amendment. Dissenting secured financial creditor cannot take advantage of amendment of Section 30(2)(b)(ii) of the IBC, 2016. The Hon’ble NCLAT delivered that “A ‘secured creditor’ cannot claim preference over the other ‘secured creditor’ at the stage of distribution out of the ‘resolution plan on the ground of ‘dissenting’ or ‘assenting’, ‘secured Financial creditor’ otherwise the distribution would be held to be arbitrary and discriminatory…. Section 30(2)(b)(ii) has been amended only to ensure that ‘dissenting financial creditor’ should not get anything ‘less than liquidation value’ but not for ‘getting maximum of the secured assets’.” The appellant preferred an appeal against the NCLAT order dated 18.11.2019 before the Hon’ble Supreme Court of India. The Hon’ble Supreme Court Observations After observations, the Hon’ble Supreme Court referred the case laws and held that there was a contradiction in the reasoning given in the judgment of this Court in India Resurgence ARC Private Limited v. Amit Metaliks Limited & Another which is in discord with the ratio decidendi of the decisions of the three Judge Bench in Committee of Creditors of Essar Steel India Limited v. Satish Kumar Gupta & Ors and Jaypee Kensington Boulevard Apartments Welfare Association & Others. v. NBCC (India) Limited & Others. In CoC of Essar Steel India Limited (supra), this Court had referred to the UNCITRAL (The United Nations Commission on International Trade Law) Legislative Guide on the treatment of dissenting creditors to observe that it is essential to provide a way of imposing a plan agreed upon by a majority of a class upon the dissenting minority to increase the chances of success of the reorganisation. The Apex court opined that, the provisions of Section 30(2)(b)(ii) by law provides assurance to the dissenting creditors that they will receive as money the amount they would have received in the liquidation proceedings. This rule also applies to the operational creditors. This ensures that dissenting creditors receive the payment of the value of their security interest. The DFC was entitled to a minimum value in monetary benefits which was equivalent to the value of the security interest what they have. The secured creditor’s entitlement to distribution under Section 53(1)(b)(ii) was applicable where the secured creditor relinquishes its security interest under Section 52 of the IBC,2016 and it was not applicable to DFC. The DFC is entitled to monetary value of the security interest. The DFC has to statutorily forgo and relinquish his security interest on the resolution plan being accepted, and his position was same and no different from that of a secured creditor who has voluntarily relinquished security and is to be paid under Section 53(1)(b)(ii) of the IBC, 2016. A Secured Creditor can vote against the resolution plan or the distribution, when they are not satisfied with proposed payout in the resolution plan, in these circumstances they are entitled to full liquidation value of the security payable under Section 53(1) on liquidation of the corporate debtor. The conflict with Section 30(2)(b)(ii) related to the minimum payment which was to be made to an operational creditor or a DFC does not arise. A DFC does not vote in favour of the resolution plan and the operational creditors does not have the right to vote. Conclusion or Confusion? Further, the Apex Court held that “In the view and ratio from India Resurgence ARC Private Limited (supra) on interpretation of Section 30(2)(b)(ii) of the IBC, we feel that it would be appropriate and proper if the question

CGRF SandBox January 2024 17 framed at the beginning of this judgment is referred to a larger Bench. The matter be, accordingly placed before the Hon’ble the Chief Justice for appropriate orders.” (Image source: website) Mr. Milan Aggarwal vs. Saudi Basic Industries Corporation (SABIC) and Anr. NCLAT | Principal Bench, New Delhi | 13th Dec 2023 “By payment of Insurance Company to Operational Creditor of its claim, Corporate Debtor cannot be absolved from its liability to discharge its Operational debt and cannot be a ground to reject IBC Section 9 application.” FACT OF THE CASE This Appeal was filed by a Suspended Director of the Corporate Debtor (Appellant) challenging the order passed by the National Company Law Tribunal, Jaipur Bench, admitting a Section 9 Application of Insolvency Bankruptcy Code,2016(IBC) filed by Saudi Basic Industries Corporation (“Operational Creditor”). The operational creditor and the Corporate Debtor entered into a Sale order agreement for the purchase of goods. The goods were delivered and an invoice was issued by the Operational Creditor for an amount of USD 403,920, which was to be paid within 90 days. However, only a partial payment of USD 276,580 was made by the Corporate Debtor, leaving a balance of USD 127,340. Several emails were sent by the Operational Creditor requesting the Appellant to make the payments. The appellant, on behalf of the Corporate Debtor, sent an email replying to the email, stating that they are expecting an extension of their bank credit limit and that they would pay their dues under all the outstanding invoices. The Corporate Debtor issued a letter acknowledging the outstanding amount and assured the Operational Creditor time and again that the entire payment would be made. However, no payments were made. Subsequently, the Operational Creditor issued a Demand Notice under Section 8 of the IBC, 2016, which was received by the Corporate Debtor. In response to this Notice, the Corporate Debtor sent an email denying the liability to pay the outstanding amount. The Operational Creditor filed a Section 9 Application. After more than two and a half years of filing the Section 9 Application, the Corporate Debtor filed an Application being an I.A. under Section 65 of the Code praying for the dismissal of the Section 9 Application. This application was dismissed by NCLT. Hence, aggrieved by the impugned order, an Appeal was filed by the Suspended Director of the Corporate Debtor. NCLT OBSERVATION The Appellant stated that the Code cannot be used for recovery proceedings. It is submitted that the Section 9 Application filed by the Operational Creditor is a proxy litigation on behalf of the Insurer. The Corporate Debtor is not a creditor. The Adjudicating Authority (AA) heard both parties and held that the Corporate Debtor had repeatedly acknowledged his liability and the Corporate Debtor for the first time tried to raise certain disputes after the receipt of the Demand Notice. The AA also held that there was no pre-existing dispute between the parties prior to the issue of the Demand Notice. The AA also returned a finding that the fact that the Operational Creditor had bought an insurance policy does not absolve the Corporate Debtor from its liability, and the Operational Creditor was obliged to initiate legal proceedings against the Corporate Debtor for dues, which the Operational Creditor was obliged to pay back to the Insurer under the terms and conditions of the insurance policy. NCLAT HELD AS FOLLOWS The contract between the Operational Creditor and the Insurer was a third party contract with which the Corporate Debtor was not concerned. The agreement with the Insurer by the Operational Creditor was communicated to the Corporate Debtor, and it cannot be accepted that the contract of the Insurer was concealed by the Operational Creditor. There is no question of any fraud committed by the Operational Creditor by filing the Section 9 Application against the Corporate Debtor. The Corporate Debtor cannot take advantage of the fact that the insurer paid the claim to the Insured. By paying off the Insurance Company’s claim to the Operational Creditor of its claim, the Corporate Debtor cannot be absolved of its liability to discharge its operational debt. Operational Creditor is under obligation to take proceedings to recover its dues and handover the amount to the Insurance Company and when the Operational Creditor filed Section 9 Application, it was not open for the Corporate Debtor to submit that application deserves to be rejected, since the amount has been received by the Operational Creditor from the Insurance Company. The Corporate Debtor cannot take shelter on the ground that Operational Creditor has received the claimed amount from the insurance Company. The Corporate Debtor is

CGRF SandBox January 2024 18 still liable to pay its debt, and the Operational Creditor is under obligation to return the money to the Insurance Company as per the terms and conditions of the Insurance Contract, where the Insurance Company offered to accept the claim with the conditions underlying it. Section 9 of the Application is fully maintainable and the fact that the Insurance Company has made payment to the Operational Creditor of its claim cannot be a ground to reject Application under Sec.9 of IBC. The Corporate Debtor is still liable to discharge its liability of debt. Regarding Pre-existing dispute between the parties, the goods were received and also amounts were acknowledged. After two years, the Corporate Debtor cannot be allowed to say that there is a pre-existing dispute for which there was no communication, although correspondences were exchanged for a long time between the parties. The NCLAT held that the Adjudicating Authority had rightly rejected the plea of a pre-existing dispute raised on behalf of the Corporate Debtor. Since the Appellant’s financial condition is good and has sufficient turnover to make the entire payment of outstanding dues, the NCLAT granted some time to the Appellant to liquidate its debt, i.e., the principal amount of USD 127,340 + 12% simple interest per annum till payment to the Operational Creditor, or else the AA may now proceed with Section 9 proceedings. Hence, the NCLAT dismissed the appeal in the following terms. I. Appellant (Corporate Debtor) is allowed 30 days’ time from the date of the order to make the entire outstanding payment of USD 127,340 to the Operational Creditor with interest at 12% per annum (simple interest) until the date of payment, which amount may be deposited with the Adjudicating Authority within 30 days from today. II. The Adjudicating Authority after being satisfied that the entire outstanding payment of dues has been made by the Appellant (Corporate Debtor) within 30 days, may not proceed any further with the CIRP of the Corporate Debtor and close Section 9 of the Application. III. In the event the Appellant does not deposit the entire amount payable to the Operational Creditor to liquidate its debt, i.e., the principal amount plus interest as indicated above, within 30 days, the Adjudicating Authority shall proceed further with the Section 9 Application. Hence, the Appeal was dismissed and directed to AA for the aforementioned submission. JINDAL POWER LIMITED Vs. DHIREN SHANTILAL SHAH, RP OF TUTICORIN COAL TERMINAL PRIVATE LIMITED AND ANR NCLAT PRINCIPAL BENCH, NEW DELHI | 08.01.2024 “To curtail the delay in the CIRP process, it is appropriate to restrain the tendency to consider resolution plans after the time as specified by the CoC and from someone not in the final list of PRAs”. Facts of the case The Corporate Insolvency Resolution Process (‘CIRP’) was initiated under Section 7 of the (Insolvency and Bankruptcy Code, 2016) (‘IBC, 2016’) by Bank of India as a Financial Creditor against the Tuticorin Coal Terminal Private Limited (‘Corporate Debtor’ ‘CD’) which was admitted by the NCLT Mumbai Bench- IV vide order dated 20.02.2020. Mr. Dhiren Shantilal Shah was appointed as IRP of the CD and later he was confirmed as Resolution Professional (‘RP’) by the Committee of Creditors (‘CoC’) of the CD. The RP issued a Form - G under Regulation 36A of CIRP Regulations, 2016 for inviting resolution plans for the Corporate Debtor on 18.09.2020. The RP received seven Expression of Interests (EoI) from the Prospective Resolution Applicants (‘PRAs’) for submission of resolution plans for the CD. In the final list out of seven PRAs only six PRAs were eligible. RP received resolution plans only from two PRAs that were presented before the CoC and the same was not accepted by the CoC. RP filed an application seeking liquidation of the CD. The Liquidation Application was pending before the Adjudicating Authority (‘AA’). In the meantime, another application was filed by SEAHAWK (SHAL Group) which was not in the final list of PRAs seeking submission of the Resolution plan and that was allowed. The CoC rejected the resolution plan submitted by SEAHAWK due to contravention and violation of the CIRP Regulations, 2016. The CIRP was delayed for the reason that the Plant and machinery of the CD in this case was subject matter of arbitration award given in favor of the supplier of machineries by Singapore International Arbitration Centre (‘SIAC’) and supplier has filed a petition for recognition of this award before the court of appropriate jurisdiction in India. One of the PRAs in the final list, which was SEAPOL filed an application seeking submission of the resolution plan and it was allowed. The AA dismissed as withdrawn the liquidation application and SEAPOL was given an opportunity to submit the resolution plan.

CGRF SandBox January 2024 19 NCLAT Observations The present Appeal has been filed by Jindal Power Limited (‘Appellant’) under Section 61 of the IBC, 2016 against the Impugned Orders dated 27.07.2023 and 22.08.2023 passed by the NCLT, Mumbai Bench – IV. In the order dated 22.08.2023 NCLT stated that the appellant is ineligible to submit a Resolution Plan for the CD. In the order 27.07.2023 AA limited the extent of appellant, while rightly granting the opportunity to submit its Resolution Plan by the appellant in order to maximize the value of the assets of the CD and held that this opportunity was subject to compliance of the provisions contained in Regulations 39(1B) read with 36B (7) of the IBBI (CIRP) Regulations, 2016. The Appellant submits that he sent an EoI to the RP showing its interest to participate in the CIRP process of the CD on 12.07.2023. But the last date of EoI had already lapsed. On 14.07.2023 the RP placed the EoI of SEAPOL before 45th meeting of CoC. The RP suggested the Appellant take appropriate directions from the AA. The Appellant filed an application and AA passed an order that allowed the appellant to submit a resolution plan for the CD on 27.07.2023. But the RP requested the appellant to seek clarification application for submission of resolution plan because appellant was not in the final list of the PRAs published by the RP under Regulation 36A (12) of the CIRP Regulations, 2016 and it was not possible to comply with Regulation 36 (1B) read with Regulation 36B (7) as directed in the order date 27.07.2023. The RP filed an application to seek clarification in the order dated 27.07.2023. On 22.08.2023, clarification was issued by AA that the appellant had statutory bar on submission of resolution plan apart from the final list of PRAs under Regulation 39(1B) read with Regulation 36B (7) of the CIRP Regulations, 2016. Grounds of the Appellant The main ground of the Appellant, if the resolution plan was accepted it will maximize the value of the assets of the CD. The main objective and Preamble of the IBC, 2016, was the maximization of value of assets of the CD. The AA allowed SEAHAWK to submit its resolution plan which was not in the final list of the PRAs. Initially SEAPOL missed the specified time to submit resolution plan which was later allowed with the permission of AA and AA finalized SEAPOL submission after multiple revisions. The appellant relied upon some judgments “Kalpraj Dharamshi Vs. Kotak Investment Advisors Ltd.” in this case the Hon’ble Supreme Court held that the commercial wisdom of the CoC is paramount and any decision of the CoC before the expiry of the timeline specified under the IBC is sacrosanct. In the matter of “Vistra ITCL (India) Ltd. Vs. Torrent Investments Pvt. Ltd.” NCLAT held that the CIRP Regulations cannot be read as a fetter on the power of the CoC to discuss and deliberate and take further steps of negotiations with the resolution applicants. In this case “Ramneek Goel Vs. Sunil Bajab & Ors.” NCLAT held that any EoI submitted prior to the expiry of 330 days of the CIRP process can be considered by the CoC, if it is in the interest of stakeholders to achieve value maximization. Further, the Appellant submits that EoI was submitted on 12.07.2023 by the Appellant, which was within 270 days of the CIRP process. Conclusion The Hon’ble Appellate Tribunal held that the case laws mentioned by appellant were not relevant to this present case. If the resolution plans are allowed to be submitted at any stage, it will make the whole CIRP process unending. To reduce and curtail the delay in the CIRP process, do not consider resolution plans after the time as specified by the CoC and from someone not in the final list of PRAs. The process prescribed in the Code and Regulations aims to maximize the value of the CD. In the present case the matter has been reversed from the stage of liquidation and one of the PRA in the final list has been given an opportunity to file its resolution plan and which is to be accepted or rejected by the CoC. If this application was allowed it would be contravention and violation of Regulation 39(1B) read with Regulation 36B (7) of IBBI (CIRP) Regulations, 2016. Hence, the Appeal was dismissed by Hon’ble NCLAT. Nehru Place Hotels and Real Estates Private Limited Vs Sanjeev Mahajan & Ors NCLAT Principal Bench New Delhi | 08.01.2024 “A settlement proposal under Sec.12A of IBC, 2016 cannot be encouraged if the CoC does not agree to accept the 12A settlement proposal and a Resolution Plan which has been approved by CoC is pending before NCLT.” Facts of the case An application was filed by Indian Bank (Sole Financial Creditor) against Nimitaya Hotel & Resorts Ltd (Corporate Debtor, CD) under section 7 of the Insolvency and Bankruptcy Code, 2016 (IBC), to initiate Corporate Insolvency Resolution Process (CIRP). The application was allowed by National Company Law Tribunal (NCLT), New Delhi on 24.12.2021. Against the order dated 24.12.2021 an Appeal was filed by Sanjeev Mahajan (1st Respondent), Suspended Director of the Corporate Debtor before National Company Law Appellate Tribunal (NCLAT) and the Appeal was disposed of on 04.07.2022 by permitting the 1st

CGRF SandBox January 2024 20 Respondent to submit a fresh proposal under Section 12A of the Code and place it before the Committee of Creditors. Later, a Resolution Plan was submitted by Nehru Place Hotels & Real Estates Private Limited (Appellant) (Successful Resolution Applicant) on 20.08.2022 along with Earnest Money Deposit of Rs.5 Crores. Subsequently the 1st Respondent also submitted a fresh proposal before the CoC as per the directions of the Hon’ble NCLAT dated 04.07.2022, but the settlement plan was not considered by the CoC. The 1st Respondent filed an Interlocutory Application in the Appeal to consider his settlement proposal which was disposed of on 21.11.2022 stating that the proposal of Applicant under section 12A for settlement has naturally to be weighed against the Resolution Plans received in the process unless the Resolution Plans are opened and deliberated side by side with the proposal of settlement submitted by the Appellant. Pursuant to the order of the Hon’ble NCLAT dated 21.11.2022, the 1st Respondent submitted the revised settlement proposal and the Appellant also submitted an addendum and clarification to the Resolution plan. On 14.12.2022 in the 14th CoC meeting both the Resolution Plan and Settlement proposal were discussed and placed for voting. As per the voting result on 08.01.2023, the Resolution Plan of the Appellant was approved with 100% voting share of CoC and settlement proposal submitted by 1st Respondent was dissented by 100% voting share. Further, Resolution Professional (RP) filed the application before Adjudicating Authority for the approval of the Resolution Plan. During the pendency of the approval of the plan before NCLT the 1st Respondent filed another Interlocutory Application in the Appeal stating that he is making offer higher than the Successful Resolution Applicant, which was also disposed of with the view that any application filed by the 1st respondent shall be considered in accordance with law by the Adjudicating Authority on 03.02.2023. The settlement proposal given by the 1st Respondent was thrice the plan value of the Appellant. The 1st Respondent again reiterated his settlement proposal and on 04.05.2023, he filed an application to seek direction to consider and deliberate on the revised proposal submitted by him. For which, on 01.12.2023, the Adjudicating Authority passed an order by giving last opportunity to him so that any acceptable settlement can be arrived and if no settlement arises before the next date of hearing, the Resolution Plan will be heard on merits. Aggrieved by the order dated 01.12.2023, Successful Resolution Applicant (Appellant) filed this Appeal. Decision of the Appellate Tribunal An appeal was filed by the appellant under Section 61 of the Code, before Hon’ble National Company Law Appellate Tribunal, Principal Bench, New Delhi, against the order dated 01.12.2023 passed by NCLT, Delhi to give last opportunity to 1st Respondent to consider this Settlement Plan. Aggrieved by the order the Appellant contested that the Adjudicating Authority committed error in giving an opportunity to the 1st Respondent to arrive at an acceptable settlement as Settlements already submitted by 1st Respondent were rejected by CoC and the Application challenging the rejection is already before the Adjudicating Authority. The Appellant relied on the Judgment of Hon’ble NCLAT “Hem Singh Bharana vs. M/s. Pawan Doot Estates Pvt. Ltd., C.A.(AT) Ins. No. 1481 of 2022”. “Regulation making Authority was well aware about the entire process under the Code, including approval of the Plan by the CoC and filing of the Application before the Adjudicating Authority for approval of the Resolution Plan. Had it intended that 12A Application can be entertained even after Resolution Plan is approved by the CoC, the proviso would not have confined to issue invitation for Expression of Interest, rather, it could have been conveniently mentioned that after approval of Resolution Plan Applicant should justify withdrawal. It was never intended that after approval of Resolution Plan by CoC, Application under Section 12A can be entertained. Hence, the Regulation is framed in that manner.” This Judgment supported the Appellant that after the approval of the Resolution Plan, settlement proposal by the 1st Respondent cannot be accepted. Later, the observations made in the NCLT order were deleted from the order which stated that, “Since, the matter is an old one, last opportunity is granted, so that any acceptable settlement can be arrived. If no settlement arises before the next date of hearing, the Resolution Plan will be heard on merits.” Further, the Resolution Plan was approved by the CoC on 08.01.2023 and application is pending for last one year before the Adjudicating Authority. The Appellate Tribunal stated that application for approval of the Resolution Plan which was filed and pending consideration, the Adjudicating Authority ought to have considered and decided the application for approval of the plan and to consider the 1st Respondents application and to take a final decision. Hence the Appellate Tribunal disposed the Appeal by directing the Adjudicating Authority to proceed expeditiously to decide the application filed by the Resolution Professional for approval of the Resolution Plan and to consider and decide the application filed by 1st Respondent in the next hearing.

CGRF SandBox January 2024 21 List of some Important cases for the month of December 2023 S.no Court & Date Name of the case Corporate Debtor Decision 1. Supreme Court of India 03/01/2024 DBS Bank Ltd. Singapore v. Ruchi Soya Industries Ltd. and Anr. Ruchi Soya Industries Ltd. The Hon'ble Supreme Court refers this case to Larger Bench for the question framed on interpretation of Section 30(2)(b)(ii) of the IBC, 2016 2. Supreme Court of India 03/01/2024 Bharti Airtel Ltd. and Anr. v. Vijaykumar V. Iyer and Ors. Aircel Ltd. and Dishnet Wireless Ltd. The provisions of IBC relating to Corporate Insolvency Resolution Process (CIRP) does not recognise the Principle of Insolvency Set-off. 3. Madras High Court 22/12/2023 V. Venkata Siva Kumar v. Insolvency and Bankruptcy Board of India and Ors Jeypore Sugar Ltd. The IP had shared the valuation report of the CD with prospective scheme proponents. This was a prima facie ground for the IBBI to issue the show cause notice and the IBBI has the jurisdiction to initiate a disciplinary proceeding. 4. Calcutta High Court 20/12/2023 Candor Gurgaon Two Developers & Projects Pvt. Ltd. v. SREI Infrastructure Finance Ltd. Srei Infrastructure Finance Ltd. The order of attachment in favour of the Award Holder, in view of Section 238 of the IBC, 2016 as a natural corollary shall be void. The claim of Award Holder in the execution proceeding virtually cannot be acknowledged by the operation of law. 5. Madras High Court 07/12/2023 Ashok B. Jeswani and Anr. v. Redington India Ltd. Pacific Infotech Pvt. Ltd The moratorium given to the corporate debtor under CIRP Chapter II will not cover the individuals, who are the Guarantors of Directors. Similarly, the moratorium given to an individual under Insolvency Resolution Process Chapter III will not cover the proceedings initiated against Directors or Guarantors of any company, which is not a corporate debtor under IBC, 2016. 6. NCLAT Chennai 10/01/2024 Mr. Ramesh Kesavan v. CA Jasin Jose, RP and Anr. SD Pharmacy Pvt. Ltd. The approval of the Resolution Plan below the Liquidation value is within the commercial wisdom of the CoC. The IBC, 2016 does not expressly bar that the Resolution Plan value should be over and above the Liquidation value. 7. NCLAT New Delhi 08/01/2024 Nehru Place Hotels and Real Estates Pvt. Ltd. v. Sanjeev Mahajan (Suspended Director) and Ors Nimitya Hotel & Resorts Ltd. A settlement proposal under Section 12A of IBC, 2016 cannot be encouraged if the CoC does not agree to accept the 12A settlement proposal and a Resolution Plan has been approved by the CoC and is pending before NCLT for Approval. 8. NCLAT New Delhi 08/01/2024 Jindal Power Ltd. v. Dhiren Shantilal Shah RP of Tuticorin Coal Terminal Pvt. Ltd. and Anr. Tuticorin Coal Terminal Pvt. Ltd The RP or CoC in the name of commercial wisdom cannot be permitted to take any decision at any point of time, which is in contravention to the provisions of IBC, 2016 in the name of maximisation of value of assets because of unnecessary delay in CIRP if unsolicited Resolution Plans are obtained at any stage. 9. NCLAT New Delhi 05/01/2024 Authum Investment and Infrastructure Ltd. v. Rajneesh Sharma Administrator of SREI Equipment Finance Ltd. and SREI Infrastructure Finance Ltd. and Ors. SREI Equipment Finance Ltd. and SREI Infrastructure Finance Ltd. The business decision of the CoC is not to be interfered with by the Adjudicating Authority unless it is shown that there is violation of Section 30(2) of the Code in the application for approval of resolution plan. 10. NCLAT New Delhi 05/01/2024 Manav Investments and Trading Co. Ltd. v. Pratim Bayal and Ors Pratim Bayal and Ors. Appeals filed by the Related parties. They cannot claim entitlement of any amount in the plan and cannot claim any discrimination with regard to payments to unrelated unsecured Financial Creditors. 11. NCLAT New Delhi 05/01/2024 Kesoram Industries Ltd. v. Pratim Bayal Birla Tyres Ltd. The essential element of disbursal, and that too against the consideration for time value of money, needs to be found in the genesis of any debt before it may be treated as ‘financial debt’ within the meaning of Section 5(8) of the Code. And also, the claim once admitted by earlier Resolution Professional can be revised by Subsequent Resolution Professional. 12 NCLAT New Delhi 03/01/2024 Narendrabhai v. PNB Housing Finance Ltd. and Anr. Nakoda Fruit Products Pvt. Ltd. The moment Adjudicating Authority is satisfied that a default has occurred, Section 7 application must be admitted unless it is incomplete 13 NCLAT New Delhi 03/01/2024 Srigopal Choudhary v. SREI Equipment Finance Ltd Ortel Communicati ons Ltd. Recall of the order cannot be allowed when a party has appeared on a date which is fixed before the Court, it is presumed that the party is well aware of the proceedings, which was taken up by the Court on the said date. 14 NCLAT New Delhi 03/01/2024 Vijay Jain and Ors. v. Laxmi Foils Pvt. Ltd. Laxmi Foils Pvt. Ltd. The Corporate Debtor may be admitted into insolvency only when the Adjudicating Authority being satisfied that default on a debt had occurred and the threshold for filing such an application had been met and that the application u/s 7(2) was complete.

CGRF SandBox January 2024 22 S.no Court & Date Name of the case Corporate Debtor Decision 15 NCLAT New Delhi 03/01/2024 D S Kulkarni & Associates v. Manoj Kumar Aggarwal RP D S Kulkarni Developers Ltd Mere fact that application for approval of Resolution Plan is pending for consideration by NCLT does not entitle to file an IA for acceptance of claim after more than one and a half year of the approval of Resolution Plan by CoC 16 NCLAT New Delhi 03/01/2024 Punjab National Bank v. Sandwoods Infratech Projects (P) Ltd. and Ors. Sandwoods Infratech Projects (P) Ltd. The approval of the Resolution plan by the CoC cannot be interfered within the exercise of judicial review by the Adjudicating Authority which provides all the securities for any debt due to the Secured Creditors can be unconditionally released and transferred in favour of Corporate Debtor. 17. NCLAT New Delhi 09/01/2024 Asian Hotels (East) Ltd. & Ors.s Vs. Yes Bank Ltd. & Anr. Asian Hotels (West) Ltd. The Sec. 12A proposal submitted by the suspended director was approved and the CD was relieved from CIRP. The CoC acted arbitrarily in rejecting the proposal while provided for 100% of all debts. 18 NCLAT Chennai 21/12/2023 V O Chidambaranar Port Authority v. Shri Rajesh Chillale, RP IndBharath Power Gencom Ltd. The claim of Port cannot be treated as a Secured Creditor for distribution of assets under Sec 53 of the Code when goods are not in the possession of Port Authority as there is no actual lien to invoke under Section 171 of Indian Contract Act,1872. 19 NCLAT New Delhi 13/12/2023 Mr. Milan Aggarwal v. Saudi Basic Industries Corporation (SABIC) and Anr. Prayag Polytech Pvt. Ltd. The Corporate Debtor cannot take benefit of the fact that Insurer had paid the claim to the Insured. Operational Creditor is under obligation to take proceeding to recover its dues and handover the amount to the Insurance Company. Corporate Debtor cannot be absolved from its liability to discharge its Operational Debt and cannot be a ground to reject IBC Section 9 application. 20 NCLAT New Delhi 06/12/2023 Sushma Paranjpe v. Rohan Developers Pvt. Ltd. Rohan Developers Pvt. Ltd. If the default is committed prior to the Section 10A of IBC period and continues in the Section 10A period, then it does not put any bar on the initiation of CIRP proceedings and mere insertion of any date in Section 7 application does not make that date of default valid and binding especially when there is no agreement between the two parties as to what shall constitute an event of default. 21 NCLT Kolkata Bench 05/01/2024 Rajesh Kumar Damani v. Mr. Jitendra Lohia, RP of Pami Metals Pvt. Ltd. and Ors Pami Metals Pvt. Ltd. Commercial wisdom of CoC in rejection of Resolution Plan of MSME Promoter cannot be called into question unless there are glaring omissions, and the deficiencies are stark 22 NCLT Mumbai Bench 05/01/2024 Inakshi Sobti & Ors. v. Starlight Systems (I) Pvt. Ltd. Starlight Systems (I) Pvt. Ltd Hon'ble NCLT stated that, no amendment to an application under Section 7 of the IBC nullifying a statutory mandate can be allowed by the Adjudicating Authority. It shall not be a right in law for a Financial Creditor under Section 7 of IBC to change the date of default. 23 NCLT Mumbai Bench 05/01/2024 Transtec Overseas Pvt. Ltd. v. Dheeraj Aviation Ground Equipments Pvt. Ltd Dheeraj Aviation Ground Equipments Pvt. Ltd NCLT Observed that the Corporate Debtor did not pay sales tax collected from the Applicant to the Sales Tax Authorities in 2008-09, such amount will by no means qualify as ‘operational debt’ owed to the Applicant because this amount is actually owed by the Corporate Debtor to the Sales Tax Authorities and does not represent the price or consideration for supply of equipment to the Applicant. Hence, the Hon'ble NCLT dismissed the Application. 24 NCLT Mumbai Bench 04/01/2024 Adishank Chemicals Pvt. Ltd. v. Baerlocher India Additives Pvt. Ltd. Baerlocher India Additives Pvt. Ltd. NCLT Stated that the non-acceptance of the goods by the Corporate Debtor cannot be equated with the default in respect of an operational debt. Hence the application was dismissed. 25 NCLT Mumbai Bench 03/01/2024 Mr. Mahesh Sureka RP v. Minesh Prints Ltd. and others Minesh Prints Ltd. The Applicant had sought directions from the Tribunal to make the Suspended Board to contribute to the Corporate Debtor in terms of Section 19(2) of the Code, to the extent the money is not paid by the stated parties. However, Hon'ble NCLT considered view that such directions are not permissible under section 19(2) and this Bench cannot direct them to co-operate. 26 NCLT Mumbai Bench 03/01/2024 Varanium Cloud Ltd. v. Rolta Pvt. Ltd Varanium Cloud Ltd. Date of default cannot be just one day after the date of disbursement especially when there is no written agreement between the parties with regard to the terms and condition of the loan, more particularly the repayment schedule, Hence the NCLT dismissed the Application. 27 NCLT Mumbai Bench 02/01/2024 Ms. Vaishali Patrikar, RP v. Darshan Developers and Others – Satra Properties India Ltd. Cheques dated prior to commencement of CIRP encashed during the Moratorium is violation of provisions of Section 14 of the Code. 28 NCLT Mumbai Bench 02/01/2024 Square Port Shipyard Pvt. Ltd. v. Mr. Vijaykumar Iyer and Others Bharati Defence and Infrastructure Ltd. The Hon'ble NCLT stated that the Liability to pay pre-CIRP dues cannot be fastened on Successful Bidder simply because the assets was purchased in auction on “as is where is” and “as is what is basis”.

CGRF SandBox January 2024 23 S.no Court & Date Name of the case Corporate Debtor Decision 29 NCLT Hyderabad Bench 02/01/2024 Suryalakshmi Cotton Mills Ltd. v. Mr. Kalavakolanu Murali Krishna Prasad, RP Rajvir Industries Ltd. The NCLT agreed, to the submission of decree holder that their claim can be considered as creditor under Section 3 (10) of IBC. 30 NCLT Mumbai Bench 02/01/2024 Panchmahal Steel Ltd. v. Kundan Industries Ltd. Kundan Industries Ltd. Petition u/s 9 of IBC arising from default in consent terms, having been taken on record by Tribunal on earlier occasions, is maintainable. Default in payment of settlement amount, even if it includes the interest component also, can be sustained, as the settlement amount itself becomes the principal amount when admitted as lump sum obligation. 31 NCLT Kolkata Bench 02/01/2024 REC Ltd. v. Hiranmaye Energy Ltd. Hiranmaye Energy Ltd The Corporate Debtor is in default of repayment as per the re-structuring plan sanctioned by the Financial Creditor, with the provisions of Section 10A not coming to his aid to escape the clutch of IBC. It had been contended that the onus of getting the pre-condition fulfilled was not only on the debtor but was also on the financial creditors. Hence the u/s 7 application was admitted. 32 NCLT Hyderabad Bench 02/01/2024 Mr. Nethi Jagadish Reddy and Ors. v. APITCO Ltd. APITCO Ltd The threshold requirement of rupees one crore under Section 4 of IBC, 2016 is in individual or joint capacity to CIRP applications. Section 7, limit is to read in joint capacity as otherwise there is no need to give opportunity to file joint application. 33 NCLT Hyderabad Bench 21/12/2023 Sun Printers v. OMICS International Pvt. Ltd. OMICS International Pvt. Ltd. Adjudicating Authority imposed cost on Operational Creditor on inflating the rate of interest to bring Operational Debt under the threshold limit under Section 4 of IBC, 2016. 34 NCLT Mumbai Bench 19/12/2023 ICICI Prudential Asset Management Company Ltd. v. Nandi Vardhan Infrastructure Ltd. Nandi Vardhan Infrastructure Ltd. Financial Creditor cannot initiate insolvency proceeding against Successful Resolution Applicant (SRA) on default in payment to Stakeholders/Creditors as per terms of approved Resolution Plan. The financial debt is in terms of section 5(8) of the IBC, 2016. The obligations of a SRA cannot be equated to a Corporate Guarantee. 35 NCLT Hyderabad Bench 19/12/2023 Masprocon v. Prasad & Company (Project Works) Pvt. Ltd. Prasad & Company (Project Works) Pvt. Ltd. Matters related to non-payment for services rendered are not within the purview of insolvency proceedings under the IBC 36 NCLT Kolkata Bench 18/12/2023 Shankar Mukherjee and Anr. v. Ravi Sethia RP and Ors. Suasth Healthcare Foundation According to Section 53(1) in Sec. 30(2)(b) of the IBC is only for the purpose of calculating the amount payable to operational creditors and dissenting financial creditors. Otherwise, there is no place for Section 53 (1) when it comes to the resolution of a corporate debtor under the CIRP. The provision of some amount should be made for operational creditors as well as dissenting financial creditors, and the amount so provided cannot be NIL. 37 NCLT Mumbai Bench 18/12/2023 Meghna Devang Juthani v. Ambe Securities Pvt. Ltd. Ambe Secruities Pvt. Ltd. While a written contract is not an absolute prerequisite for establishing the existence of a financial debt, the Adjudicating Authority must ascertain that the initiation of CIRP is not done in mala fide and is genuinely aimed at resolving insolvency. 38 NCLT Mumbai Bench 18/12/2023 Mysore Petro Chemicals Ltd. v. Mrs. Vandana Garg, RP Raghuleela Builders Pvt. Ltd. Real Estate Appellate Tribunal can continue proceedings during CIRP and pass order against the Corporate Debtor during moratorium. It is incumbent upon IRP to find out and follow all pending proceeding against Corporate Debtor and Claim filed after order of RERA cannot be said to be a belated claim barred by limitation. 39 NCLT Hyderabad Bench 07/12/2023 Vertex Cranes & Hoists India Ltd. v. Rotodyne Engineering Services Pvt. Ltd. Rotodyne Engineering Services Pvt. Ltd. Adjudicating Authority exercising summary jurisdiction cannot determine the claim amount of Operational Creditor and initiate the CIRP. 40 NCLT Hyderabad Bench 07/12/2023 K. Lakshma Reddy v. Telangana State Rajiv Swagruha Corporation Ltd. Telangana State Rajiv Swagruha Corporation Ltd. Construction of flats for Corporate Debtor does not fall under definition of Operational Debt under Section 5(21) of IBC, 2016 and the Contractor cannot be considered as Operational Creditor as dues to be paid does not relate to Goods or Services.

CGRF SandBox January 2024 24 IP’s Corner Common mistakes by IPs during conduct of CIRP CGRF Bureau Introduction The Insolvency and Bankruptcy Code, 2016 (“Code”) envisaged Corporate Insolvency Resolution Process (“CIRP”) for time bound revival of viable corporate debtor and closure/winding-up of unviable corporate debtor through liquidation process. An Insolvency Professional (“IP”) is the key driver of CIRP. IP acts as an Interim Resolution Professional (“IRP”) in the initial days of CIRP and thereafter as Resolution Professional (“RP”) till completion of CIRP or commencement of Liquidation process. IP manages the operations of the corporate debtor as a going concern and assists the stakeholders in ascertaining the feasible and viable resolution plan, while protecting and preserving the value of assets of the corporate debtor and ensuring compliance with all the applicable laws of the corporate debtor including the CIRP process. As the Code facilitates and empowers an IP with huge responsibilities and duties, monitoring is required to ensure effectiveness. Thus, the Code mandates monitoring of the performance of IPs during the CIRP and empowers Insolvency Professional Agencies (“IPA”) to call for information and records. Section 208(2)(c) of the Code read with the Code of Conduct for IPs provided in IBBI (Insolvency Professional) Regulations, 2016 (“IP Regulations”) authorises the IPAs to conduct inspection on IPs enrolled with it. The objective of inspection is to ascertain whether the conduct of IPs is in overall interest of the stakeholders, corporate debtor and to ensure that the position of trust held by IPs is not abused by them and in cases where it is, to ensure appropriate action is taken. The IPAs while conducting inspection have witnessed various common deficiencies in the conduct of CIRP undertaken by IPs. In general, IPs do not strictly comply with the provisions of the Code/Regulations. They do not exercise diligence and reasonable care while discharging their duties. In a few cases, there are lapses due to lack of clarity in the provisions of the laws, and thus misinterpretation results in inadvertent mistakes. These shortcomings often put the corporate debtors at risks and renders loss to the concerned stakeholders. As most of these shortcomings are unintentional, it can be avoided with a little more care and diligence, while performing duties by the IPs and thereby preventing any disciplinary action. The following are some of the common mistakes observed by IPA / IBBI during inspections: 1) Assignment without having Authorisation: Reg.7A of the IP Regulations requires an IP not to accept or undertake CIRP assignment, unless he holds a valid authorisation for assignment on the date of such acceptance or commencement of such assignment. There are instances where IPs had undertaken CIRP assignments without having an AFA leading to contravention of the Code. Further, it is also noted that IPs do not prominently state in their communications the validity of their authorisation for assignment, as required under the said IP Regulations. 2) Public announcement: Sec.15 of the Code read with Reg. 6 of CIRP Regulations requires the IRP to make a public announcement immediately on his appointment (“immediately” means not later than 3 days from the date of IRP appointment). This public announcement is required to be made in one English and one regional language newspapers having wide circulation at the location of the registered office and principal office of the corporate debtor. There are instances where the IRPs are not making this public announcement promptly on their appointment or publish the same as per the specific requirements in one English and one regional language with wide circulation. 3) Claims / updating of list of claims: Sec.25(2)(e) of the Code read with Reg.13 of the CIRP Regulations mandates the IRP/RP to verify every claim as per timeline, and thereupon maintain a list of creditors containing their names, the amount claimed & admitted by IRP/RP, and the security interest, if any, in respect of such claims, and, update it. IRP/RP is required to post the updated list of creditors from time to time on the website, if any of the corporate debtor and shall also file the same on the electronic platform of the IBBI for dissemination on its website. Further, the list of creditors is also required to be filed with NCLT on every occasion, when it is updated. There are instances where IPs do not post the list of creditors on the web site of the corporate debtor / IBBI. In many cases, updated list of creditors is also not filed with NCLT. Further, it is also observed that IPs do not intimate the reasons in writing for rejection or part admission of claim amount to the claimants promptly, which leads to disputes. 4) Appointment of professionals: It is the duty of the RP to preserve and protect the assets of the corporate debtor, including continuing its business operations. Sec.25(2) of the Code read with Reg.27 of CIRP Regulations empowers an RP to appoint professionals to assist him in discharge of his duties in conduct of

CGRF SandBox January 2024 25 the CIRP, if he is of the opinion that the services of such professionals are required and such services are not available with the corporate debtor. Further, IP Regulations stipulates that an IP should not outsource any of his duties and responsibilities under the Code, except those which are specifically permitted, and also prohibits an IP from engaging or appointing any of his relatives/related parties for or in connection with any work relating to any of his assignment. An IP is therefore required to satisfy himself that – (i) there is a need for the services of a professional; (ii) such services are not available within the corporate debtor; (iii) the person to be appointed is qualified and is suitable for the purpose; (iv) such professional is not a relative or related party of the IP; and (v) the fee payable to such professional is reasonable. There are instances where RPs have appointed professionals without satisfying the above conditions thereby incurring additional cost to the already burdened corporate debtor. There are few instances where RPs have appointed related party as professionals and in some cases RP appointed professional to assist the CoC during CIRP. 5) Appointment of registered valuers: Reg.27 of the CIRP Regulations stipulates appointment of two set of registered valuers (RVs) for each class of assets for determining the fair value and the liquidation value of the corporate debtor. These values serve as a reference for evaluation of the resolution plans and for determining the minimum amount payable to operational creditors, and also the financial creditors who do not vote in favour of such resolution plan. IBBI reiterated the significance of appointment of “registered valuer” [ie., a valuer registered with the IBBI under the Companies (Registered Valuers and valuation) Rules, 2017] through various circulars and stated that the appointment of any other person other than a “registered valuer, is illegal and amounts to violation. Further, IBBI also stipulated that payments, whether as a fee or otherwise, to any person, other than a ‘registered valuer’ for any valuation under Reg.27, shall not form part of CIRP costs. There are few instances where the RP appointed persons other than RVs for conduct of valuations and in some cases, only one RV is appointed instead of two. In some cases, payments were made to entities directly in which the valuers are associated. 6) Avoidance transactions: The Code/Regulations casts a duty on the RP to file applications in respect of any Preferential, Undervalued, Fraudulent and Extortionate (‘PUFE”) transactions for appropriate directions by NCLT, with a view to claw back the value lost in these transactions. RP is required to form an opinion on PUFE transactions within 75th day of the Insolvency Commencement Date (ICD). Further, where the RP is of the opinion that the corporate debtor has been subjected to any transaction covered under PUFE transactions, he is required to make a determination of the same before 115th day and to file relevant application with NCLT within 130th day of the ICD. There are instances where the RP failed to independently apply his mind to form a opinion on such transactions and file applications in respect of them. In few cases, RP go by the directions of the CoC or stakeholders. This may reflect serious dereliction of duty and breach of trust in addition to depriving the stakeholders of their legitimate dues. 7) Payment to creditors during CIRP: The Code requires every creditor to submit claims as on ICD to the IRP. Sec.14 of the Code prohibits settlement of any such claim during CIRP and requires the resolution plan to deal with them together in the manner decided by the CoC, subject to section 30(2) of the Code. Therefore, the IRP / RP cannot clear the dues of any creditor during the CIRP, as this amounts to giving preferential treatment to one creditor over others and thereby alters the priority mandated under the Code. He cannot also allow any creditor, who is having custody of funds of the corporate debtor, to appropriate it towards its own dues. There are instances where the RPs either allowed payment of dues outstanding as on the ICD or appropriation of amount from accounts maintained by corporate debtor with creditors during CIRP. This not only impacts the interests of remaining creditors but also put a question to the independence and integrity of the IP. 8) Circulation of minutes: The CoC is empowered to decide various matters in a CIRP, including approval or rejection of a resolution plan. CIRP Regulations provides that the IRP/RP shall take a vote of the members of the CoC, on any item listed for voting after the discussion on the same. Reg.24(7) of CIRP Regulations requires the RP to circulate the minutes of the meetings by electronic means to members of CoC within 48 hours of the conclusion of the meeting. There are instances where the IRP/RP failed to record and circulate minutes promptly within the stipulated timeline and in some case circulated

CGRF SandBox January 2024 26 incorrect minutes. This may reflect poorly on the competence and integrity of the IP and may cause delay in critical decisions. 9) CIRP Costs: Section 5(13) of the Code read with Reg. 31 of the CIRP Regulations specifies what is to be included in CIRP Costs. Further, IBBI vide its Circular dated 12th June 2018 clarified that the following shall not be included in CIRP costs: a. any fee or other expense not directly related to CIRP; b. any fee or other expense beyond the amount approved by CoC, where such approval is required; c. any fee or other expense incurred before the commencement of CIRP or to be incurred after the completion of the CIRP; d. any expense incurred by a creditor, claimant, resolution applicant, promoter or member of the Board of Directors of the corporate debtor in relation to the CIRP; e. any penalty imposed on the corporate debtor for non-compliance with applicable laws during the CIRP; f. any expense incurred by a member of CoC or a professional engaged by the CoC; g. any expense incurred on travel and stay of a member of CoC; and h. any expense incurred by the CoC directly; i. any expense beyond the amount approved by the CoC, wherever such approval is required; and j. any expense not related to CIRP. There are instances where such costs were included in the CIRP cost. This may reflect undue influence of beneficiaries on the IP, in addition to causing diminution of value of the corporate debtor. 10) Compliance with applicable laws: Sec.17(2)(e) of the Code mandates the IRP/RP to comply with the requirements under any law for the time being in force on behalf of the corporate debtor. Any noncompliance has a cost to the concerned corporate debtor and attracts penal consequences. The IRP/RP is responsible for the non-compliance of the provisions of the applicable laws, if it is on account of his conduct during the CIRP. There are instances where an IRP/RP failed to comply with requirements of various applicable laws in respect of the corporate debtor. This reflects lack of competence and professionalism of the IP, compromises the interests of stakeholders, and burdens the corporate debtor with the liabilities for failure of the IP to make compliances. 11) Compliance with orders of NCLT: The NCLT issues directions from time to time to facilitate smooth conduct of CIRP, generally based on applications by the parties. The proceedings before the NCLT are judicial proceedings and its directions are orders of the Court. Any non-compliance with any of their orders may amount to contempt of court. There are a few instances where the RP failed to comply with directions of the NCLT. Such disregard of the order of the NCLT may jeopardise the CIRP, impact the interests of stakeholders and in some serious cases, severe orders were passed against the IPs also. 12) Filing of Forms with IBBI: Reg.40B of CIRP Regulations, requires IRP/RP to file Forms as specified therein as per the stipulated timelines on the electronic platform of IBBI. The purpose of filing of these forms is to enable IPs to easily comply with the statutory obligation of submission of records relating to the conduct of CIRP and the resolution plan and copy of records of every proceeding under section 208(2)(d) of the Code. They also facilitate the IBBI to effectively monitor the CIRP and the performance of IP. Hence, nonfiling of any of these forms leaves the IBBI in a blind spot where it is unable to view the progress of the CIRP. This is seen as a deliberate dereliction of duties which otherwise any IP is mandated to perform under the statute. 13) Preservation of records: Reg.39A of the CIRP Regulations requires an IRP/RP to preserve a physical as well as an electronic copy of the records relating to CIRP. Further, regulation 7(2)(g) of the IP Regulations requires an IP to maintain records of all assignments undertaken by him under the Code for at least three/ eight years from the completion of such assignment. It is observed that in few cases IPs failed to produce complete records in respect of CIRPs conducted by them. This suggests the possibility of failure to comply with the relevant provisions of law as well as lack of transparency. Disclaimer: This article is based on the IBBI Facilitation letter dated13th Nov.2020 and practical issues faced by IPs. The observations made herein are only indicative and only for educational purpose. IPs are advised to refer to the Code, the Rules, Regulations made thereunder, as may be amended from time to time.

CGRF SandBox January 2024 27 “Think Again” Adam Grant –Book Review S. Rajendran “Think Again” - The power of knowing what we don’t know “Progress is impossible without change, and those who cannot change their mind cannot change anything”. George Bernard Shah Rethinking is an essential attribute for success in any field of activity be it professional space or family life. What makes rethinking special is the ability to find better alternatives and re-validate earliest practices which might not be relevant today in changed circumstances. The author, Adam Grant is an organisational psychologist from US, but having his roots from Russia. He says that “intelligence is usually seen as the ability to think and learn, but in a rapidly changing world, it might matter more that we can rethink and unlearn.” He has created a wonderful piece of writing after years of research into various aspects. “Think Again” is divided into three major parts, namely: • Individual rethinking • Interpersonal rethinking and • Collective rethinking The author begins with an interesting narrative in his prologue, with a real life story of how a bunch of firefighters lost their lives fighting a forest fire in 1949 in Helena National Forest, Montana State, US. It is stunning to know how only two fighters could escape the fire, which was not worth fighting at all in the first place. Tools baggage He goes on to add that it’s very difficult to disregard some of the tools we cling to in our day-to-day life. For example, the assumptions, instincts and habits always have a kind of overbearing on our thought process and decisions. The author explains that having an open mind gives a lot of potential for improvisation and taking better decisions like what the firefighters could have done by just dropping their heavy tools kit and running away from the fire to safety. The fall of Blackberry An interesting story narrated by the author relates to the rise and fall of BlackBerry. All of us know very well how Blackberry dominated the smartphone market with a full fledged qwerty keyboard. As of 2009, BlackBerry accounted for nearly half of the US smartphone market. However, by 2014, its market share plummeted to less than 1%. Well, what is the reason for such dramatic downfall of very large organisation? Mike Lazaridis, who was the co-founder, president and CEO of BlackBerry was in charge of the technical and product decisions on BlackBerry. The failure to rethink ended up the company losing its market share to the iconic Apple iPhone, which innovated after its own struggles with its charismatic leader, Steve Jobs. The author adds “most of us take pride in our knowledge and expertise and in staying true to our beliefs and opinions. That makes sense in a stable world where we get rewarded for having conviction in our ideas. The problem is that we live in a rapidly changing world where we need to spend as much time rethinking as we do thinking”. IQ is not the ultimate thing The author goes on to say that the mental horsepower doesn’t guarantee mental dexterity. After all, being a maths whiz kid or the ability to score high marks on an IQ test goes to prove that you are faster at recognising patterns. The better you are at crunching numbers, the more spectacularly you fail at analysing patterns that contradict your views. Confirmation bias and desirability bias Confirmation bias is seeing what we expect to see while desirability bias is seeing what we want to see. Adam Grant suggests that we should think like a scientist rather than like a preacher, a prosecutor or a politician. Scientific thinking favours humility over pride, doubt over certainty and curiosity over closure. Fat-cat syndrome of resting on our laurel instead of pressure testing the beliefs is a major reason for falling victim. Most annoying things people say In many situations, we hear words like ‘that will never work here’, ‘that’s not what my experience has shown’, ‘that’s too complicated, let’s not overthink it’, ‘that’s the way we have always done it’, ‘let’s not reinvent the wheel’, etc. These are all the most annoying things people

CGRF SandBox January 2024 28 say instead of encouraging a mindset to have a rethinking on newer possibilities in changed circumstances. A few more important quotes from the book “The curse of knowledge is that it closes our minds to what we don’t know. Good judgement depends on having a skill and to open our minds. I am pretty confident that in life rethinking is an increasingly important habit.” Humility is often misunderstood being meek and having low self-confidence, but strangely humility means “from the earth”, it is about being grounded that we are flawed and fallible. We become blinded by arrogance when we are utterly convinced of our strengths and our strategies. We get paralysed by doubt when we lack conviction in both. We can be consumed by inferiority complex when we know the right method but feel uncertain about our ability to execute it. What we want to attain is confident humility: having faith in our capability, while appreciating that we may not have the right solution, or even be addressing the right problem that gives us enough doubt to re-examine our old knowledge and enough confidence to pursue new insights. The Joy of being wrong On the joy of being wrong, the author says that when a core belief is questioned, we tend to shut down rather than open up. Attachment is what keeps us from recognising that our opinions are off the mark. To unlock the joy of being wrong, we need to detach. We need to detach our present from our past; also we need to detach our opinions from our identity. If you don’t look back at yourself and think “Wow.. how stupid I was a year ago”, then you must not have learnt much in the last year. Jeff Bezos of Amazon says “people who are right a lot, listen a lot, and they change their mind a lot. If you don’t change your mind frequently, you are going to be wrong a lot.” Psychologist point out that admitting we were wrong doesn’t make us look less competent. It is a display of honesty and willingness to learn. Challenge Network Agreeable people make for a great support network. They are excited to encourage us and cheerlead for us but rethinking depends on a different kind of network: a challenge network, a group of people we trust to point out our blind spots and help us overcome our weaknesses. Their role is to activate rethinking cycles by pushing us to be humble about our expertise, doubt our knowledge and be curious about new perspectives. We learn more from people who challenge our thought process than those who affirm our conclusions. Strong leaders engage their critics and make themselves stronger. Weak leaders silence their critics and make themselves weaker. Adam Grant spends quite a few pages of the book writing about the Wright Brothers who invented the aeroplane. Highlighting on the huge difference between task conflict and relationship conflict, the author highlights that Wright Brothers were having intense task conflict without relationship conflict. When they raise their voices, it reflected intensity rather than hostility. The Human Vs. Machine debate Another beautiful narrative about winning debates and influencing people, the author makes an interesting story of the IBM Project Debate pitched against the world champion of debates, Harish Natarajan. Demonstrating an excellent and beautiful way of storytelling, the author highlights how a human being is able to strike a chord with their audience as compared to the computer programme developed by IBM. Vaccine Whisperers In yet another interesting anecdote, Adam Grant highlights how young mothers in Australian suburbs changed their views about vaccines for their new borns and small kids, particularly when there was a strong belief that vaccines brought more problems than preventing diseases. When someone is trying to change your beliefs, the natural course for you is to defend your thinking and by this process you get more convinced that you are correct in your beliefs. The author highlights about motivational interviewing techniques by which the people can be encouraged to examine their beliefs and behaviours. He goes on to add that our role is to hold up a mirror so that they can see themselves more clearly. Empowering them to examine their beliefs and behaviour can activate a rethinking cycle in which people approach their own views, more scientifically. They develop more humility about their knowledge, doubt in their convictions and curiosity about alternative points of view. What I know Things I know I know Things I know Things I think I know Things I don’t know

CGRF SandBox January 2024 29 Asking open ended questions, engaging in reflective listening and affirming the person’s desirability to change are the key techniques in motivational interviewing. When we try to convince people to think again, our first instinct is usually to start talking. Yet the most effective way to help others to open their minds is often to listen. This is what the vaccine whisperers did to change the mindset towards vaccines. Dealing with the art of influential listening, the author says that listening well is more than a matter of talking less. It is a set of skills in asking and responding. It starts with showing more interest in other peoples’ interest rather than trying to judge their status or prove our own. Binary bias The author encourages everyone to come out of the thinking that only two solutions are there for a problem. It takes a multitude of views to help people realise that they too contain multitudes. A dose of complexity can disrupt overconfidence cycles and spur rethinking cycles. It gives us more humility about our knowledge, more doubts about our opinions, and it can make us curious enough to discover information we were lacking. The best way to learn is to teach It has been demonstrated repeatedly that one of the best ways to learn is to teach. On the topic of collective rethinking, the author suggests holding of “passion talks” in which any one of the students could teach the class about something he or she loves the most. Sharing passion has been part of class participation and a way of introducing themselves to their peers. This activity injects a heightened level of curiosity into the room, leaving them eager to soak up insights from each of the classmates. The author points out that one of the education pioneers, Ron Berger, devoted his life to teaching students the ethic of excellence. He wanted his students to experience the joy of discovery. When presented with problems, the students try to grapple with the issues on hand and try to find out various methods to solve the complex problems and it’s quite possible that they often feel confused. Embrace confusion Psychologists highlight that one of the hallmarks of an open mind is responding to confusion with curiosity and interest. Confusion can be a cue that there is new territory to be explored or a fresh puzzle to be solved. Ron wasn’t content to deliver lessons that erased confusion. He wanted students to embrace confusion. He encouraged students to think like a young scientist. He also wanted to teach his students to revise their thinking based on input from others and therefore he turned the classroom into a challenge network. He encouraged the students to be specific and kind: to critic the work rather than the author. Erin McCarthy, Wisconsin’s teacher of the year 2020, sends her eighth grade students to do group project work on chapters from their textbook by a process of inspection, investigation, interrogation, and interpretation. The author adds emphatically that extraordinary educators foster rethinking cycles by instilling intellectual humility, disseminating doubt, and cultivating curiosity. The author goes on to explain how NASA bungled on a few occasions on its strict regimen on component quality before undertaking a mission into space. However, there were two spectacular failures resulting in loss of 14 precious lives. On investigation, the reasons found out for the failure were due to circular gaskets called “O” rings and foam loss. In another instance, a faulty space suit nearly drowned one of the astronauts in space. Going on to say that while accountability is one issue, psychological safety is more critical which will encourage the team members to admit errors, highlight issues and invite criticisms which will be taken as opportunities for improvement. It takes confident humility to admit that we are a work in progress. It shows that we care more about improving ourselves than proving ourselves. The worst thing about best practices Quoting extensively on the practises followed at NASA, the author goes on to say that “if the outcome of a decision is positive, it doesn’t necessarily qualify as a success. If the process was shallow, you were lucky. If the decision process was deep, you can count it as an improvement: you have discovered a better practice. If the outcome is negative, it’s a failure only if the decision process was shallow. If the result was negative, but you evaluated the decision thoroughly, you have run a smart experiment.” When one of the senior engineers in NASA raised her voice that the launch of a space shuttle flight should be delayed until a problem is solved, it did raise eyebrows because the problems highlighted were there earlier also, and since there was no backlash, the team felt that they could go ahead with the launch. However, on analysis, it was figured out that the root cause lay somewhere else and the fault was identified and rectified. Conclusion On the concluding session of the book, Adam Grant highlights a very frequent question being asked of the children, “What do you want to be when you grow up ?” He says that many children grew up with a mindset to become an engineer or doctor but their priorities and perceptions get a makeover in their teenage or during college education and even after finding an employment. The author says that several industrialists and managers commit the mistake of escalation of commitment, like further funding to a failed project, constantly searching for self justifications for prior beliefs as a way to soothe

CGRF SandBox January 2024 30 our egos, shield our images and validate our past decisions. He goes on to add that researches have suggested that gritty mountaineers are more likely to die on expeditions, because they are determined to do whatever it takes to reach the summit. However, there is a fine line between heroic persistence and foolish stubbornness. In this context, one remembers the Tamil poet, Thiruvalluvar has long before stated that if you don’t fear something to be feared, then it’s foolishness. Speaking more on identity closure, the author highlights that it stops us from evolving and rethinking. Making a lifelong commitment, they get trapped in an overconfident cycle, taking pride in perceiving a career identity and surrounding themselves with people who validate their conviction. By the time they discover it was the wrong fit, they feel it is too late to think again. About the cover page of the book One may be wondering about the cover page of the book, which features a candle (or a match stick?) having a flame, but not a flame of fire, but a flame of a water droplet. Interestingly, the idea for the cover page has come from a 12-year-old kid which is really praiseworthy. Creative rethinking is the need of the hour, and thinking liberates us to do more than update our knowledge and opinions. It’s a tool for leading a more fulfilling life. On the whole, “Think Again” is a wonderful collection of newer concepts, interesting narratives and bold venture into suggesting challenging the present and become a better person by always getting into a questioning mode. “If knowledge is power, knowing what we don’t know is wisdom.” Advisory for furnishing Bank Account details by registered Taxpayers under Rule 10A of the Central Goods and Services Tax Rules, 2017 In the official advisory (No. 623) released on January 23, 2024, the Goods and Services Tax Network (GSTN) has underscored the essential obligation for registered taxpayers to provide their bank account information following Rule 10A of the Central Goods and Services Tax Rules (CGST), 2017. As per the provisions outlined in the CGST Act, 2017, and its corresponding rules, all registered taxpayers are required to furnish their bank account details within 30 days from the registration date or before the due filing date of GSTR-1/IFF, whichever comes first. To ensure adherence and avoid any interruptions in business operations, taxpayers who have not yet furnished their bank account details are strongly urged to do so promptly, particularly if the 30-day timeframe is approaching expiration. Noncompliance may lead to the suspension of GSTIN and subsequent disqualification from filing GSTR-1/IFF. To streamline this procedure, a new functionality with tailored features is presently in the process of development and will be rolled out in the upcoming days. 1. Failure to furnish the bank account in the stipulated time: It would result into following: • Taxpayer Registration would get suspended after 30 days and intimation in FORM REG-31 will be issued to the Taxpayer. • Get the Taxpayer debarred from filing any more GSTR-1/IFF. 2. Revocation of suspension: If the taxpayer updates their bank account details in response to the intimation in FORM REG-31, the suspension will be automatically revoked. 3. Cancellation of Registration: If the bank account details are not updated even after 30 days of issuance of FORM REG-31, the registration after suspension may also be taken up for cancellation process by the Officer. (Source: GSTN Official advisory No.623 dt. 23.01.2024) Humour time What is the definition of an accountant? Someone who solves a problem you did not know you had, in a way you don’t understand.

CGRF SandBox January 2024 31 CLUES WORDS 1. Under the Companies Act 2013, a Company may be wound up by ________________ 2. What is the time limit within which the first meeting of committee of creditors should be held within ____ of its constitution. 3. Who shall declare moratorium under IBC? 4. Within ____ of such change, the resolution professional shall notify the participants and the adjudicating authority of any resultant change in the committee due to transfer of debt? 5. The asset in respect of which no default in repayment of principal or payment of interest has occurred is known as ____________ 6. The Board of every specified company shall ensure that the company spends in every financial year on account of CSR policy at least _________ % of average net profit during last three years. 7. The ______ can propose to replace the liquidator with a voting share of 66% after recording the reasons. Answers 2 days 4) Adjudicating Authority ) 3 7 days ) 2 NCLT) National Company Law Tribunal ( 1) SCC 7) 2% 6) Standard Asset 5) OF ADJU 2DAYS NC STAN LT 7DAYS ET ITY HOR DICA AUT DARD TING ASS Guess the Answers!!!

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